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December 5, 2016

Homework Help: economics

Posted by Dave on Monday, June 29, 2009 at 1:14pm.

Suppose that the typical snowboarder/skier visiting Mount Unknown ski resort on a typical day would be willing to pay for lifts up the mountain according to the following schedule. (see graph …url below)

1. Why does the WTP schedule slope downward ?

2. Suppose all skiers at Mount Unknown 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?

3. Is $5/lift ride the per ride price which maximizes revenue? Explain , using the elasticity concept in your answer.

4. Show the area on the graph that would correspond to consumer's surplus earned by the typical boarder/skier with this payment scheme. Explain your answer briefly.

5. 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 Unknown.

Graph : tinypic . com/r/2la787p/5

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