Answered: The graph below shows the daily demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The graph below shows the daily demand for entry into the downtown core of a major city by commuter vehicles and shoppers’ vehicles if they were required to pay a special traffic fee in order to enter.

a. Draw the total demand curve. Plot only three points of the curve.

b. Assuming that there is no charge for entry, what is the total number of vehicles entering downtown? (Give your answers in tens of thousands of vehicles.)

Quantity of vehicles:

c. Suppose that government, in an effort to reduce the number of vehicles by 50 percent, decides to impose a traffic fee (the same fee for both commuters and shoppers) for entry into the downtown area. What will be the amount of the fee, and how many of each group will enter downtown?

Fee: $

Number of commuter vehicles:

Number of shoppers’vehicles:

d. Assume that government, alternatively, decides to have a two-fee system but still wishes to reduce the traffic by 50 percent of the no-fee entry level. If it decides to charge shoppers $6, how much will it have to charge commuters?

Fee to commuters: $

a. Draw the total demand curve. Plot only three points of the curve.
Commuters
Shoppers
42
Tools
36
Total demand
30
24
18
12
6.
6
12
18
24
30
36
42
Number of vehicles per day (tens of thousands)
Traffic fee

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