Calculate the arc elasticity of demand for buses on the run

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Reference no: EM131005113

Transit buses on a local San Francisco run carry 1000 passengers a day who are each charged 50 cents. The marketing department feels that by raising the price to 75 cents, ridership will decline by 200 persons (to 800 passengers a day).

i. Suppose these estimates are correct. Use the midpoint rule to calculate the arc elasticity of demand for buses on the run.

ii. Does this increase in price increase Transit’s revenue on these trips? Why or why not? Explain.

Reference no: EM131005113

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