The Acmeville Metropolitan Bus Service currently charges $0.88 for an all-day ticket, and has an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.99. The marketing department's studies indicate this price increase would reduce usage to 221 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place.

The Acmeville Metropolitan Bus Service currently charges $0.88 for an all-day ticket, and has an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.99. The marketing department's studies indicate this price increase would reduce usage to 221 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter14: Pricing Techniques And Analysis

Section: Chapter Questions

Problem 7E

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