Business, 12.10.2021 03:30 blueflu5120

1. The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase: "Compared to December 1994, there were nearly four million fewer riders--a decline of 12%-in December
1995, the first full month after the price of a token increased by 15%" Suppose for the sake of argument
that the reduction in the number of riders was caused solely by the price hike.
a) Use the info given to calculate the price elasticity of demand for subway rides. Show your calculation! Is
the demand elastic or inelastic? Explain.
b) According to your estimate, what happens to the Transit Authority's total revenue (TR) when the fare
rises? (That is, did total revenue increase or decrease as a result of the price hike?) Explain. If the Transit
Authority's goal is to maximize total revenue, was hiking the token price a good idea?

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1. The New York Times reported (Feb. 17, 1996) that subway ridership declined after a fare increase:...

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