Consider the private hire market such as Uber and Lyft. Assume that the price elasticity of demand for private-hire rides is -1.25 and the cross-price elasticity of demand between private-hire rides and public transport trips is 0.2. Daily revenue in the private-hire market is $1,000,000. i) What is the economic relationship between private-hire rides and public transport trips? Based on the cross-price elasticity of demand, will it be an effective strategy to reduce private- hire travel by cutting public transport prices? ii) If the price of private-hire rides increases by 10%, what is the effect on private-hire daily revenue? Please answer in full with equations and formulas if required. Can someone explain more in detail for part ii) with formulas.

Consider the private hire market such as Uber and Lyft. Assume that the price elasticity of demand for private-hire rides is -1.25 and the cross-price elasticity of demand between private-hire rides and public transport trips is 0.2. Daily revenue in the private-hire market is $1,000,000. i) What is the economic relationship between private-hire rides and public transport trips? Based on the cross-price elasticity of demand, will it be an effective strategy to reduce private- hire travel by cutting public transport prices? ii) If the price of private-hire rides increases by 10%, what is the effect on private-hire daily revenue? Please answer in full with equations and formulas if required. Can someone explain more in detail for part ii) with formulas.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 10PA

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