Consider the private hire market such as Uber and Lyft. Assume that the price elasticity of demand for private-hire rides is -1.25 and the cross-price elasticity of demand between private-hire rides and public transport trips is 0.2. Daily revenue in the private-hire market is $1,000,000. i) What is the economic relationship between private-hire rides and public transport trips? Based on the cross-price elasticity of demand, will it be an effective strategy to reduce private- hire travel by cutting public transport prices? ii) If the price of private-hire rides increases by 10%, what is the effect on private-hire daily revenue? Please answer in full with equations and formulas if required. Can someone explain more in detail for part ii) with formulas.

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