Class - Econ 505: Economic Business

Topic: The consumer, the demand for products and elasticity

1. Explain and detail the operation of the supply and demand curves, and their interaction in the market, textually and with the help of graphics.

2. Explain what elasticity is and how it works, how the elasticity of supply and the elasticity of demand are estimated, including related examples. (Use theorists and theories to support the answers).

3. Suppose business travelers and vacationers have the following demand for airline tickets from New York to Boston:

Price Amount TIckets Businesses Amount Tickets Vacationers $150 2,100 1,000 $200 2,000 800 $250 1,900 600

By changing the price of the tickets from $200 to $250,

a. What is the price elasticity of demand for:

i) business travellers, and ii) vacationers? (Use the midpoint method for your calculations.)

b. Why might vacationers show different elasticity than business travelers?