The elasticity of transit demand with respect to price has been found to be equal to -2.75. which means that a 1% increase in transit fare will result in a 2.75 decrease in the number of passengers using the system. A transit line on this system carries 12,500 passengers per day, charging 50 cents per ride. The management wants to raise the fare to 70 cents per ride. What advice would you offer to management?
The elasticity of transit demand with respect to price has been found to be equal to -2.75. which means that a 1% increase in transit fare will result in a 2.75 decrease in the number of passengers using the system. A transit line on this system carries 12,500 passengers per day, charging 50 cents per ride. The management wants to raise the fare to 70 cents per ride. What advice would you offer to management?
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
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 7E: In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price...
Related questions
Question
100%
Please answer with explanation.
I will really upvote
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning