There were nearly four million fewer [subway] riders in December 1995, the first full month after the price of a token increased 25 cents to $1.50, than in the previous December, a 4.3 percent decline.@ (New York Times, Feb. 17, 1996) Use these data to estimate the price elasticity of demand for subway rides. According to your estimate, what happens to the Transit Authority’s revenue when the fare rises? Why might your elasticity estimate be unreliable?
There were nearly four million fewer [subway] riders in December 1995, the first full month after the price of a token increased 25 cents to $1.50, than in the previous December, a 4.3 percent decline.@ (New York Times, Feb. 17, 1996) Use these data to estimate the price elasticity of demand for subway rides. According to your estimate, what happens to the Transit Authority’s revenue when the fare rises? Why might your elasticity estimate be unreliable?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- There were nearly four million fewer [subway] riders in December 1995, the first full month after the
price of a token increased 25 cents to $1.50, than in the previous December, a 4.3 percent decline.@ (New York Times, Feb. 17, 1996)
- Use these data to estimate the
price elasticity of demand for subway rides. - According to your estimate, what happens to the Transit Authority’s revenue when the fare rises?
- Why might your elasticity estimate be unreliable?
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