Problem 5 Consider the following pairs of goods. For which of the two goods woul

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Problem 5 Consider the following pairs of goods. For which of the two goods would you expect the demand to be more price elastic? Why? a. water or diamonds b. insulin or nasal decongestant spray c. food in general or breakfast cereal d. gasoline over the course of a week or gasoline over the course of a year e. personal computers or Dell personal computers Problem 6 Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston Quantity Demanded (Business Travelers) 2,000 1,900 Quantity Demanded (Vacationers) 800 600 Price $200 $250 As the price of tickets rises from $200 to $250, what is the price of elasticity of demand for (i) business travelers and (ii) vacationers, respectively? (Use the midpoint method in your calculations.) Why might vacationers have a different elasticity than business travelers? Explain a. b.

Explanation / Answer

ans 5=

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