An increase in the demand for green tea raises the price of green ...

[stephzh]

An increase in the demand for green tea raises the price of green tea from 16 a pound to 20 a pound. As a result, quantity supplied increases by 30 percent. Using the midpoint formula, what is the value of the price elasticity of supply?
 
  A) 1.35 B) 1.875 C) 2.22 D) 7.5

Question 2

What are some of the ways that real-world airlines price discriminate?
 
  What will be an ideal response?

[Loise Hard]

Answer to Question 1

A

Answer to Question 2

Vacation travelers are willing to pay less than business travelers, so airlines need to sort vacation travelers from business travelers. Vacation travelers generally know well in advance when their vacation will occur and so they are able to purchase their tickets in advance. In addition vacation travelers are often willing to spend a weekend at their destination. Travelers who either buy their tickets in advance and/or are willing to spend a weekend at the destination are identifying themselves as vacation travelers and airlines charge them a lower price. The airline companies make airline tickets non-transferable, preventing the vacation travelers with the lower willingness to pay from reselling their less expensive tickets to the business travelers with the higher willingness to pay.