The elasticity of demand for the London Underground is estimated to be around -0.3 in the short term (one to two years). In 2018 there were around 1,400 million passenger journeys on the London Underground. Revenue from the London Underground in 2018 was £2,669 million. For 2019, Transport for London would like to increase the average fare by 4%. Explain and answer the following questions: In 2018, what is the average fare for the London Underground?How large (in £) is the 4% increase of the average fare?How many journeys will there be after the fare increase?How much extra revenue is raised if the average fare is increased by 4%?

Disclaimer :- as you posted multipart questions we are supposed to solve the first 3 questions only.…

Answered: The elasticity of demand for the London…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The elasticity of demand for the London Underground is estimated to be around -0.3 in the short term (one to two years). In 2018 there were around 1,400 million passenger journeys on the London Underground. Revenue from the London Underground in 2018 was £2,669 million. For 2019, Transport for London would like to increase the average fare by 4%. Explain and answer the following questions:

In 2018, what is the average fare for the London Underground?
How large (in £) is the 4% increase of the average fare?
How many journeys will there be after the fare increase?
How much extra revenue is raised if the average fare is increased by 4%?

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