Question 2 - 60 marks (2-5 sentences + calculations per section) a. Examine BTE (1986, table 4.2, p. 35) at https://www.

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Question 2 60 Marks 2 5 Sentences Calculations Per Section A Examine Bte 1986 Table 4 2 P 35 At Https Www 1 (156.7 KiB) Viewed 83 times

Question 2 - 60 marks (2-5 sentences + calculations per section) a. Examine BTE (1986, table 4.2, p. 35) at https://www.bitre.gov.au/sites/default/files/2019- 11/tedb-table1a02.pdf. i. Interpret the real income elasticity of short-haul flights and explain why it is less than 1? (8 marks) ii. Why are flights other than short-haul flights, considered luxuries? (6 marks) iii. Explain why the real airfare demand is elastic for 'Summer holiday' (Tasmania) and Winter sunspots' (Queensland), but inelastic for short, medium and long haul flights? (6 marks) b. The Tasmanian Minister for Infrastructure and Transport, Michael Ferguson, recently announced that bus travel would become free (see here for details). P1-Po i. Using the simple formula %AP = x 100% to calculate the percentage change in the Po price bus fares if they fall to $0. Use this with the Explicit short-run elasticity of bus travel reported in Goodwin (1992, table 3, p. 160) to estimate the percentage change in bus travel in the short-run. (15 marks) ii. Why does the price elasticity of bus travel become more elastic in the long run? (5 marks) C. Consider the following diagram. Annual Market for Fresh Blue Berries, Tasmania 2022 and 2023 Price ($ per 125g punnet) D2 P2023 * =$5.50 P2022 *= $4.50 Q2023=360 220238=460 02022=540 Quantity (thousands of punnets) i. Use the mid-point formula to calculate the price elasticity of demand for blue berries in Tasmania over 2022 and 2023 for D1 and D2. Which demand curve is more elastic, D1 or Dz? Explain what this result means. (15 marks) ii. Explain whether sellers should raise or lower prices in order to maximise revenue if they are on D2 and the price is $5.50 per punnet by using the elasticity you found in i. (5 marks)