Last year the US low-cost-carrier Spirit Airlines entered the Dallas-Chicago market. The average ticket price for all airlines servicing the route fell from $200 to $180. After Spirit’s entry, the number of passengers increased from 700 to 800 per day (these numbers are hypothetical, but reasonable). Calculate the price elasticity of demand between the two points. Show the computation.
Let the price before Spirit Airlines entered Dallas-Chicago market be P1 and the price after entry be P2