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As a regional manager for American Airlines, you have recently conducted a survey of the number of passengers per flight on the Chicago-Louisville route that
As a regional manager for American Airlines, you have recently conducted a survey of the number of passengers per flight on the Chicago-Louisville route that you service. The survey data provides insights into passenger behavior. The demand elasticity measures how sensitive the quantity demanded is to changes in price. Calculate the price elasticity of demand for this route using the following information: Initial price (P1): $200 Final price (P2): $220 Initial quantity demanded (Q1): 1,000 passengers Final quantity demanded (Q2): 900 passengers Interpret the calculated elasticity value. What does it imply about passenger responsiveness to price changes? Additionally, you notice that the airline plans to increase the ticket price by 10%. Based on your elasticity estimate, predict the percentage change in quantity demanded
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