Thousands of tourists visit Paris every year to see the Eiffel Tower. When the p

Question

Thousands of tourists visit Paris every year to see the Eiffel Tower. When the price of admission to the Eiffel Tower was 9 Euros, approximately 6.9 million people visited the tower every year. The French government knows that if they decided to increase the price to 10 Euros, demand to visit the Eiffel Tower would reduce by 0.1 million people.

1. If the demand curve is taken to be linear, it would slope downwards at a rate of 10 Euros/million people.

2. Most tourists consider the Eiffel tower as a "must-see tourist attraction". This could explain why a relatively large percentage increase in the price of admission led to a relatively smaller percentage decrease in tickets demanded.

3. If the demand for admission to the Eiffel Tower is taken to be linear, the point elasticity of demand would be inelastic at every point along the entire demand curve.

Which of the following statements are true:

a) Only 1 is true

b) Only 2 is true

c) Both 1 and 2 are true

d) Both 2 and 3 are true

e) All three are true

Explanation / Answer

C) Both 1 and 2 are correct.

A relatively large percentage increase in the price of admission led to a relatively smaller percentage decrease in tickets demanded. Hence, it's true.

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