The Sydney Transportation Company operates an urban bus system in New South Wales, Australia. Economic analysis performed by the firm indicates that two major factors influence the demand for its services: fare levels and downtown parking rates. Table 1 presents information available from 2005 operations. Forecasts of future fares and hourly parking rates are presented in Table 2. Table1 Average daily Transit riders (2005) Average Down Town round Trip Fare Parking Rate 5,000 $1.00 $1.50 Year Round Trip Fare Average parking Rates 2006 $1.00 $2.50 2007 $1.25 $2.50 Sydneys economists supplied the following information so that the firm can estimate ridership. Based on past experience, the coefficient of cross elasticity between bus ridership and downtown parking rates is estimated at 0.2, given a fare of $1.00 per round trip. This is not expected to change for a fare increase to $1.25. The price elasticity of demand is currently estimated at -1.1, given hourly parking rates of $1.50. It is estimated, however, that the price elasticity will change to -1.2 when parking rates increase to $2.50. Using these data, estimate the average daily ridership for 2006 and2007.
The Sydney Transportation Company operates an urban bus system in New South Wales, Australia. Economic analysis performed by the firm indicates that two major factors influence the
Table1
Average daily
Transit riders
(2005)
Average Down
Town round Trip
Fare
Parking Rate
5,000
$1.00
$1.50
Year
Round Trip Fare
Average parking
Rates
2006
$1.00
$2.50
2007
$1.25
$2.50
Sydneys economists supplied the following information so that the firm can estimate ridership. Based on past experience, the coefficient of cross elasticity between bus ridership and downtown parking rates is estimated at 0.2, given a fare of $1.00 per round trip. This is not expected to change for a fare increase to $1.25.
The
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