The price elasticity of demand for plane rides is 05 The pri

The price elasticity- of demand for plane rides is 0.5. The price elasticity of demand for train rides is 0.2. The cross elasticity of demand for train rides with respect to the price of a plane ride is 0.4. If the price of a plane ride rises by 10 percent, the percentage change in the quantity demanded of plane ndcs is a decrease of percent. If the price of a plane ride rises by 10 percent, the percentage change in the quantity demanded of train rides is an increase of percent.

Solution

1) Price elasticity for plane rides = % change in the quantity demanded for the plane rides / % change in the price of plane rides

0.5 = - % change in the quantity demanded for the plane rides / 10%

% change in the quantity demanded for the plane rides = 5% decline

2)

Cross Price elasticity for train rides = % change in the quantity demanded for the train rides / % change in the price of plane rides

0.4 = % change in the quantity demanded for the train rides / 10%

% change in the quantity demanded for the train rides = 4% increase