The Acmeville Metropolitan Bus Service currently charges $0.77 for an all-day ticket, and is used by an average of 588 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 $0.88. The marketing department\'s studies indicate this price increase would reduce usage to 337 riders per day. Calculate the price elasticity of demand for bus tickets to determine if the bus company should increase price or decrease price to increase revenues.
The Acmeville Metropolitan Bus Service currently charges $0.77 for an all-day ticket, and is used by an average of 588 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 $0.88. The marketing department\'s studies indicate this price increase would reduce usage to 337 riders per day. Calculate the price elasticity of demand for bus tickets to determine if the bus company should increase price or decrease price to increase revenues.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The Acmeville Metropolitan Bus Service currently charges $0.77 for an all-day ticket, and is used by an average of 588 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
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