Question Number 1 An airline is considering introducing an advance purchase fare to supplement its existing economy fare. It conducts a study to assess the patronage of such a fare. The following table summarizes the projected weekly sales for various advance purchase sales. Advance Purchase Fare ($) No of Advance Purchase No of Economy Tickets Tickets 50 2,000 200 100 1,200 400 120 900 500 150 600 600 180 200 1,000 What is the Price Elasticity of Advance Purchase Tickets when the fare rises from $100 to $180? Assume that Airline is experiencing serious cash flow problem; your immediate objective is to increase total revenue. What is your fare strategy? Question Number 2 Suppose that your demand schedule for T-shirts is as follows: - Price $ 5 8 11 14 Qd (Income=$12M) 20 16 12 8 Qd (Income=$15M) 25 22 19 16 Calculate and interpret the Price Elasticity of Demand as the price of T-Shirts increases from $ 8 to 14 $ if your income is $15M. Question Number 3 Compute and interpret the Price Elasticity of demand for Coffee from the following data; Commodity Before After Price ($) Quantity (Cup) Price ($) Quantity (Cup) Coffee 40 50 60 30 Tea 20 40 30 10 Question Number 4 Referring to the empirical estimates of Price Elasticity shown in the table below: Category of Good Fuel & Light Food Alcohol Dairy Produce Price E O D -0.47 -0.52 -0.83 -0.05 If the Price of Alcoholic drinks increased by 5%, Ceteris Paribus, what would happen to the quantity demanded? Calculate and explain. What is your Price Strategy for each product shown in above table to increase the revenue? Question Number 5 Commodity Before After Price / Unit Quantity Price / Unit Quantity Butter $10.5 300 $25.0 400 Margarine $11.0 150 $11.0 300 A) Find the Cross-Price Elasticity of Demand between Butter & Margarine for the above data and interpret your results. 1/2 B) If we want to increase the demand for Margarine by 30% how much price of Butter we have to change