Question 2 of 11 Sapling Learning macmi lan learning Map f The Acmeville Metropo

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Question 2 of 11 Sapling Learning macmi lan learning Map f The Acmeville Metropolitan Bus Se average of 433 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 rvice currently charges $0.99 for an all-day ticket, and is used by an imhdicalte this prace inond nedea h to etric t The marketing department's studies Calculate the absolute value of the price elasticity of demand for bus tickets using the simple percentage change method to determine if the bus company should increase price or decrease price to increase revenues. Number Price elasticity of demand is O O O O Demand is elastic, so decreasing ticket prices will increase revenue. Demand is elastic, so increasing ticket prices will increase revenue. Demand is inelastic, so increasing ticket prices will increase revenue. Demand is inelastic, so decreasing ticket prices will increase revenue. O Previous Give Up & View Solution O check Answer Next ! Exit-

Explanation / Answer

Price elasticity =proportionate change in the quantity demanded /proportionate change in the price

=433-182/433 whole divided by 1.21-0.99/0.99=0.58/0.22=2.63

Since it is greater than 1 Demand is elastic. So decreasing ticked price will increase revenue. The reason is small change in price will increase demand by larger amount

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