. Gas Prices and Public Transit Ridership. Consider the effect of higher gasoline prices on public transitridership. The initial price of public transit is $2.00 per ride and the initial ridership is 100,000 people per day. Supposethe elasticity of transit ridership with respect to the price of gasoline is +0.667 or (2/3) and the price of gasoline increasesby 30 percent? A. Assume the price of public transit remains at $2. Use a graph to show the effect of the increase in thegas price on transit ridership. B. Suppose the transit authority matches the increase in the price of gasoline, increase thetransit fare by 30 percent. The price elasticity of demand for transit ridership is 0.333 (or 1/3). Use your graph to showthe combined effect of the gas tax and higher transit fare. C. Explain why the net change in transit ridership is positiveor negative.

Cross-price elasticity of demand measures how the quantity demanded of one good responds to a change…

Answered: Gas Prices and Public Transit…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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