Calculate the price elasticity of demand for both economy and premium seats using the mid-point method and classify the two seats based on the price elasticity of demand. Question 1In an economy, long distance travel is usually provided by high-speed rail and coaches. Thefares of high-speed rail are in general higher than the coach fares. Consider a high-speed railcompany that offers two classes of seats in its rides, a small number of premium seats at ahigher price and a large number of economy seats at a relatively lower price. The companyhas increased the ticket prices recently for both seats to cover the higher operational costs.The prices and quantities sold for both seats before and after the price hike is shown in thetable below.Economy SeatsPremium SeatsPriceQuantityPriceQuantity$30280$20050$45140$30040(a) Calculate the price elasticity of demand for both seats using the mid-point method andclassify the two seats based on the price elasticity of demand.

Price elasticity of demand: - Price elasticity of demand measures the responsiveness of change in…

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alculate the price elasticity of demand for both economy and premium seats using the mid-point method and classify the two seats based on the price elasticity of demand.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 9E

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