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Economics, Microeconomics
Year 1

Elasticity/Consumer Surplus


Suppose that 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. (see attched file)

a)why does the WTP 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?

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

d)show the area on the graph that would correspond to consumer's surplus earned by the typical snowboarder or 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.  

Attachments
SkiProblem.jpg  View File

By OTA:  Ramas Ramaswami, PhD

OTA Rating:  4.8/5

Your Price:  $2.19  (original value ~$23.94)

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