Question 1: Suppose that business travelers and vacationers have the following demand for

airline tickets from Islamabad to Dubai:

Price($) Quantity Demanded Quantity Demanded

(Business Travelers) (Vacationers)
150 2100 tickets 1000 tickets
200 2000 800
250 1900 600
300 1800 400

a) As the price of the tickets rises from $200 to $250, what is the price elasticity of
demand for
i) business travelers,
ii) vacationers?
b) Why might vacationers have a different elasticity from business travelers?

Question 2: Suppose that your demand schedule for DVDs is as follows (8

marks)

Price($ Quantity Demanded Quantity Demanded

) (income= $10,000) (Income = $12000)
8 40 DVDs 50 DVDs
10 32 45
12 24 30
14 16 20
16 8 12

c) Calculate price elasticity of demand as the price of DVDs increases from $8 to

$10 if
i. income is $10,000,
ii. income is $12,000

d) Calculate your Income elasticity of demand as your income increases from

10,000 to 12,000 if
i) The price is $12
ii) The price is $16

Note: Soft copy of assignment is due on 10th March 2019. Soft copy shall be submitted at
Turnitin and hard copy shall be submitted on standard A4 sheet to the CR by 11th March 2019.
No time extension shall be given for the second assignment.
Format: 12 font, Times new Romans with 1.5 spacing on A4 sheet