Problem 1: Rank the following (please provide a brief explanation as well) from the most to least elastic.
1. Beef
2. Salt
3. European vacation
4. Steak
5. Honda Accord
6. Dijon mustard
Problem 2: Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:
Price Qty. Demanded (business travelers) Qty. Demanded (vacationers)
$150 2,100 1,000
200 2,000 800
250 1,900 600
300 1,800 400
a. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the arc elasticity method in your calculations.)
b. Why might vacationers have a different elasticity than business travelers?