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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.

Question
 

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.

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Step 1

PED (Price elasticity of demand) depicts the responsiveness of change in the quantity demanded as a ratio ...

DED%A in quantity demanded
%A in price level
Where
%A in quantity demanded New quantity- Old quantity100
Old quantity
and
%A in price level New price-Old price 100
Old price
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DED%A in quantity demanded %A in price level Where %A in quantity demanded New quantity- Old quantity100 Old quantity and %A in price level New price-Old price 100 Old price

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