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usage to 208 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.

usage to 208 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.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 9E
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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 472 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 208 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.
Transcribed Image Text:The Acmeville Metropolitan Bus Service currently charges $0.77 for an all-day ticket, and is used by an average of 472 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 208 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.
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