The elasticity of transit demand with respect to price has been found to be equal to -2.75. which means that a 1% increase in transit fare will result in a 2.75 decrease in the number of passengers using the system. A transit line on this system carries 12,500 passengers per day, charging 50 cents per ride. The management wants to raise the fare to 70 cents per ride. What advice would you offer to management?

The elasticity of transit demand with respect to price has been found to be equal to -2.75. which means that a 1% increase in transit fare will result in a 2.75 decrease in the number of passengers using the system. A transit line on this system carries 12,500 passengers per day, charging 50 cents per ride. The management wants to raise the fare to 70 cents per ride. What advice would you offer to management?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 6.1IP

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