Answer:
For business travellers = 0.23 and for vacationers = 1.29
Explanation:
I the price of the ticket rises from $200 to $250 the price elasticity for business travellers and for vacationers is as follows:
Price elasticity for business travellers
= (Q2-Q1)/[(Q2+Q1)/2]/(P2-P1)/[(P2+P1)/2]
= [(1900-2000)/1950]/[(250-200)/225]
= -0.23
Therefore, elasticity = |-0.23| = 0.23
ii) Price elasticity for vacationers = (Q2-Q1)/[(Q2+Q1)/2]/(P2-P1)/[(P2+P1)/2]
= [(600-800)/700]/[(250-200)/225]
= -1.29
Therefore, elasticity = |-1.29| = 1.29
