The New York Times reported (Feb. 17, 1996) thatsubway ridership declined after a fare increase:“There were nearly four million fewer riders inDecember 1995, the first full month after the priceof a token increased 25 cents to $1.50, than in theprevious December, a 4.3 percent decline.”a. Use these data to estimate the price elasticity ofdemand for subway rides.b. According to your estimate, what happensto the Transit Authority’s revenue when thefare rises?c. Why might your estimate of the elasticity beunreliable?
The New York Times reported (Feb. 17, 1996) thatsubway ridership declined after a fare increase:“There were nearly four million fewer riders inDecember 1995, the first full month after the priceof a token increased 25 cents to $1.50, than in theprevious December, a 4.3 percent decline.”a. Use these data to estimate the price elasticity ofdemand for subway rides.b. According to your estimate, what happensto the Transit Authority’s revenue when thefare rises?c. Why might your estimate of the elasticity beunreliable?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The New York Times reported (Feb. 17, 1996) that
subway ridership declined after a fare increase:
“There were nearly four million fewer riders in
December 1995, the first full month after the
of a token increased 25 cents to $1.50, than in the
previous December, a 4.3 percent decline.”
a. Use these data to estimate the price elasticity of
demand for subway rides.
b. According to your estimate, what happens
to the Transit Authority’s revenue when the
fare rises?
c. Why might your estimate of the elasticity be
unreliable?
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