The New York Times reported (Feb. 17, 1996) thatsubway ridership declined after a fare increase:“There were nearly four million fewer riders inDecember 1995, the first full month after the priceof a token increased 25 cents to $1.50, than in theprevious December, a 4.3 percent decline.”a. Use these data to estimate the price elasticity ofdemand for subway rides.b. According to your estimate, what happensto the Transit Authority’s revenue when thefare rises?c. Why might your estimate of the elasticity beunreliable?
The New York Times reported (Feb. 17, 1996) thatsubway ridership declined after a fare increase:“There were nearly four million fewer riders inDecember 1995, the first full month after the priceof a token increased 25 cents to $1.50, than in theprevious December, a 4.3 percent decline.”a. Use these data to estimate the price elasticity ofdemand for subway rides.b. According to your estimate, what happensto the Transit Authority’s revenue when thefare rises?c. Why might your estimate of the elasticity beunreliable?
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 8PA: The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase:...
Related questions
Question
The New York Times reported (Feb. 17, 1996) that
subway ridership declined after a fare increase:
“There were nearly four million fewer riders in
December 1995, the first full month after the
of a token increased 25 cents to $1.50, than in the
previous December, a 4.3 percent decline.”
a. Use these data to estimate the price elasticity of
demand for subway rides.
b. According to your estimate, what happens
to the Transit Authority’s revenue when the
fare rises?
c. Why might your estimate of the elasticity be
unreliable?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
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
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc