Question 1
SkyyMarley Airlines has determined that the price elasticity of demand for two customer segments (Coach and Business Class) is -1.35 and -2.50. Based on their expectations of profitability, SkyyMarley realizes the price of a Coach seat should be $175 (one way). How much should SkyyMarley charge for a Business Class ticket? (
Question 2
Consider that the demand curve for apples is given by Qd = 140 - 5P, where Qd is the number of pounds demanded per year and p is the price per pound. The supply of apples can be described by Qs = 40 + 3P, where Qs is the number of pounds provided.
A What is the equilibrium price?
B What is the equilibrium quantity supplied and demanded?
C Determine the consumer surplus at the equilibrium price.
D Determine the producer surplus at the equilibrium price.
E Evaluate the total surplus at the equilibrium price.
F Now assume that the government imposes a tax of $8 per each pound sold, paid by the consumers,. In this case, what are the price and the consumer surplus?