b) One of your colleagues has suggested that it is important to lower the price of train tickets. In that case, she argues, the demand will increase. Do you agree with her? Explain why.

Microeconomics: Private and Public Choice (MindTap Course List)
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Chapter7: Consumer Choice And Elasticity
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Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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a) Describe the relationship between elasticity and total revenue when considering
an increase in price.
You are the manager of a train company. Recently total sales have been a bit low and
you are now considering means to give sales a boost. Market research has shown that
currently the price of train tickets is historically low. Market research has also shown
that the demand curve for train tickets is downward sloping. You may assume that your
company is not a price taker on the market.-
b) One of your colleagues has suggested that it is important to lower the price of
train tickets. In that case, she argues, the demand will increase. Do you agree
with her? Explain why.
c) She continues her argument by concluding that if the demand goes up, the total
value of sales of train tickets should therefore increase. Do you agree with her?
Explain why.
Transcribed Image Text:a) Describe the relationship between elasticity and total revenue when considering an increase in price. You are the manager of a train company. Recently total sales have been a bit low and you are now considering means to give sales a boost. Market research has shown that currently the price of train tickets is historically low. Market research has also shown that the demand curve for train tickets is downward sloping. You may assume that your company is not a price taker on the market.- b) One of your colleagues has suggested that it is important to lower the price of train tickets. In that case, she argues, the demand will increase. Do you agree with her? Explain why. c) She continues her argument by concluding that if the demand goes up, the total value of sales of train tickets should therefore increase. Do you agree with her? Explain why.
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