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Detailed analysis of willingness to pay also elasticity.

Suppose which the typical snowboarder /skiier visiting Mount Mogul ski resort on a typical day would be willing to pay for lifts up the mountain according to the following schedule.

a) Elucidate why does the WTP schedule slope downward?

b) Suppose all skiers at Mount Mogul had the same WTP schedule as this skier also the resort operator charged $5 per ride up the lift. Illustrate what is the elasticity of demand at this price?

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

d) Elucidate how the area on the graph which would correspond to customer's surplus earned by the typical boarder/skiier with this payment scheme. Elucidate your answer briefly.

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

688_WTP schedule slope downward.jpg

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M920362

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