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Posted: July 20th, 2022
Price elasticity of demand
Each of the following situations contains an assumption about price elasticity of demand. What is the assumption? For each situation state whether the assumption is accurate and explain your reasoning. 1.Sky King, world traveler, says if the airlines want to increase total revenue, they should lower fares for business travelers as well as for vacationers. Both groups should respond equally to a price decrease 2.Bill Smith, a candidate for the state legislature, is proposing a large increase in the tax on cigarettes and liquor. He says “I’m not proposing these taxes to raise revenue but to discourage reckless drinking and the filthy smoking habit. If the price of cigarettes and liquor go up, the majority of people will quit using them. After all no needs to smoke or drink”
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