Question: Suppose that families with children ages 6-12 years old and families with children ages 15-21 years old have the following demand for tickets to Disney World.
Quantity Demanded/Week Quantity Demanded/Week
Price per Ticket (families with 6-12 year olds) (families with 15-21 year olds)
$ 50 3,100 1,000
75 2,900 700
100 2,600 500
125 2,400 400
Q1. Calculate the price elasticity of demand for: (i) families with 6-12 year old children and; (ii) families with 15-21 year old children as the price per ticket rises from $50 to $75, and then increases from $75 to $100. Compute the simple average of these two elasticity estimates such that you have an average elasticity estimate for families with children ages 6-12 and families with children ages 15-21.
Q2. Whose demand is more price sensitive, families with children ages 6-12 years old, or those with children ages 15-21 years old? Why do you think this is the case?
Q3. Suppose that Disney know which group’s demand is the more price inelastic. How does this knowledge influence Disney's decisions on pricing tickets to Disney World?