The Acmeville Metropolitan Bus Service currently charges $0.67 for an all-day ticket, and has an average of 513 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.78. The marketing department's studies indicate this price increase would reduce usage to 262 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place. price elasticity of demand 4.28

The Acmeville Metropolitan Bus Service currently charges $0.67 for an all-day ticket, and has an average of 513 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $0.78. The marketing department's studies indicate this price increase would reduce usage to 262 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place. price elasticity of demand 4.28

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A firm with pricing power (i.e. a price-maker) estimates that the elasticity of demand for its product is __A= -3.50___. To maximize profits by what percentage above cost should it markup its price?
The Acmeville Metropolitan Bus Service currently charges $0.99 for an all-day ticket, and has an average of 472 riders a day. The bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. They must therefore find a way to increase revenues. The bus company is considering increasing the ticket price to $1.1. The marketing department's studies indicate this price increase would reduce usage to 195 riders per day. Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method. Round your answer to one decimal place. price elasticity of demand = Which of the statements is true?
Which of the following figures is most likely to represent the cross price elasticity of demand of one internet service provider to another internet provider a) -3 b) 0 c) 2.5 d) -0.55
The company is considering lowering the price of Model A to $27 in an effort to increase the number of units sold. Based on the results of price changes that have been instituted in the past, Tennis Products’ chief economist estimates the arc price elasticity of demand to be –2.5. Furthermore, she estimates the arc cross elasticity of demand between Model A and Model B to be approximately 0.5 and between Model A and Model C to be approximately 0.2. Variable costs per unit are not expected to change over the anticipated changes in volume. a. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin of Model A. Based on this analysis, should the firm lower the price of Model A? Explain b. Evaluate the impact of the price cut on the (i) total revenue and (ii) contribution margin for the entire line of tennis rackets. c. Based on this analysis, should the firm lower the price of Model A? Explain
A single producer company surveyed the elasticity data of its product X. The results indicated that: - X has an income elasticity of +0.8 - The cross-elasticity of X with Y is equal to -0.7 - The price elasticity of X is |0.8| Given these results, the company estimated that the forecast increase in consumer income is 5% next year, the expected increase in the price of Y is 10%. If the company intends to increase its sales by 3% in the following year, what is your recommendation for an adjustment in the price of X? (Hint: Consider the increase in income, then the effect of Y on X and then calculate the price adjustment to be made)
The current world production of oil is 350 million barrels per day and the current world price of oil is N$850 per barrel. The price elasticity of demand (ε) is -0.3 and the elasticity of supply (η) is 0.1. Shiwa Investment is planning to enter the world oil market with a daily production of 13 million barrels of oil per day. For simplicity, assume that the supply and demand curves are linear Calculate market price and total supply of oil after Shiwa investment has enter the world oil market and explain why the total supply of oil increases with less than 13 million.
The price elasticity of demand for air travel differs radically from first-class (-1.3) t to restricted discount coach (-1.8). Given these elasticities, what will be the difference between the optimal prices (fares) of first class and discount coach on a cross-country trip with incremental variable costs (marginal costs) equal to $120?
Amy is a graduate student living in Dallas who works as a caddy to supplement their normal income. At an hourly wage rate of $15, they are willing to caddy 5 hours per week. Upping the wage to $25 per hour, they are willing to caddy 14 hours per week. Using the midpoint method, the elasticity of Amy’s labor supply between the wages of $15 and $25 per hour is approximately (0.06, 0.53, 1.89, 10.56) , which means that Amy’s supply of labor over this wage range is (elastic/inelastic) .
Star wars coffee mugs are traded in a competitive world market with a price of R180 per cup. Unlimited quantities are available for import into South Africa at this price. On average 10 000 kg are traded each month. The elasticity of demand has been estimated at -0.81 and elasticity of supply at 3.51. Derive the demand equation for the star wars coffee mug. . . A. Qd = 12 800 - 45P B. Qd = 15 200 - 35P C. Qd = 18 100 - 45P D. Qd = 20 000 - 50P Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The GetUFit Company manufactures elliptical machines. The variable cost per unit to produce a model designed for in-home use is $500. The firm sold 1,311 of these machines at a price of $1,959. When the price was decreased to $1,613, sales increased to 2,256 units. Assuming all else equal and a linear demand function, calculate the profit maximizing price that GetUFit should charge for the machine. Currency (US) FREE
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomac's closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $545. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. a) What is the arc cross elasticity of demand between Potomac's oven and the competitive Spring City model? b) If Potomac knows that the arc price elasticity of demand for its ovens is −2.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?
Q1. Suppose the government is considering an increase in the toll on a certain stretch of highway from $3 to $4. At present, 1 million cars per week use that highway stretch; after the toll is imposed, the number of cars per week will change according to its price elasticity of demand of -0.8 (this elasticity value is estimated based on the initial-value method). If the marginal cost of highway use is constant (i.e., the supply curve is horizontal) and equal to $3 per car, what is the net annual cost to society attributable to the increase in the toll? (your answer must be rounded off to the nearest million dollars per year, i.e., no decimal places; there are 52 weeks in a year)