What is the elasticity of demand at price

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Reference no: EM13839510

Assume a downward sloping line on a graph represents the amount of money that a typical snowboarder /skiier visiting Mount Mogul ski resort on a typical day would be willing to pay for successive lift trips up the mountain if lift trips were charged by the individual ride and all day passes were not available.

a) Why does the typical skier’s WTP (willingness to pay) schedule slope downward?

b) Suppose all skiers at Mount Mogul had the same WTP schedule as this skier and the resort operator charged $5 per ride up the lift. What is the elasticity of demand at this price? Show your calculations!

c) Is $5/lift ride the per ride price which maximizes revenue? Explain, using the elasticity concept in your answer. d) Show (or clearly describe) the area on the graph that would correspond to consumer's surplus earned by the typical boarder/skiier with this payment scheme. Explain your answer briefly.

e) If the ski-resort owner eliminates the possibility of buying single ride lift tickets and instead sells only an all-day lift pass, entitling the skier/boarder to as many trips up the mountain as desired, what is the maximum price that could be charged without discouraging the skier from coming to Mount Mogul.?

Reference no: EM13839510

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