1. When tolls on the Dulles Airport Greenway were increased from $1.25 to $1.50,
ID: 2505936 • Letter: 1
Question
1. When tolls on the Dulles Airport Greenway were increased from $1.25 to $1.50, traffic decreased from 21,000 to 16,000 trips a day. Assuming all changes in quantity were due to the change in price, what is the price elasticity of demand for the Dulles Airport Greenway?
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When tolls on the Dulles Airport Greenway were increased from $1.25 to $1.50, traffic decreased from 21,000 to 16,000 trips a day. Assuming all changes in quantity were due to the change in price, what is the price elasticity of demand for the Dulles Airport Greenway?Explanation / Answer
Ans.
The price elasticity of demand (PED) is calculated by diving the percentage change in quantity demanded by the percentage change in price.
percentage change in quantity demanded=(16000-21000)/21000=-5000/21000=-5/21
percentage change in price=(1.50-1.25)/1.25=1/5
PED=-5/21 / 1/5
=-25/21 = -1.19
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