The elasticity of demand for the London Underground is estimated to be around -0.3 in the short term (one to two years). In 2018 there were around 1,400 million passenger journeys on the London Underground. Revenue from the London Underground in 2018 was £2,669 million. For 2019, Transport for London would like to increase the average fare by 4%. Explain and answer the following questions: a)In 2018, what is the average fare for the London Underground?b)How large (in £) is the 4% increase of the average fare?c)How many journeys will there be after the fare increase?d)How much extra revenue is raised if the average fare is increased by 4%?

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Answered: The elasticity of demand for the London…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The elasticity of demand for the London Underground is estimated to be around -0.3 in the short term (one to two years). In 2018 there were around 1,400 million passenger journeys on the London Underground. Revenue from the London Underground in 2018 was £2,669 million. For 2019, Transport for London would like to increase the average fare by 4%. Explain and answer the following questions:

a)In 2018, what is the average fare for the London Underground?

b)How large (in £) is the 4% increase of the average fare?

c)How many journeys will there be after the fare increase?

d)How much extra revenue is raised if the average fare is increased by 4%?

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