Elasticity of demand for bus services is 0.23 for the peak hours and 0.42 for off-peak hours. The same percentage increase in price would:
A) lower revenues for both, but more for peak hours.
B) raise revenues for both, but more for peak hours.
C) raise revenue for peak hours but lower revenue for off-peak hours.
D) lower revenue for peak hours but raise revenue for off-peak hours.

Question

Quizplus · Accepted Answer

Since the elasticity of demand is less than 1 for both peak and off-peak hours, demand is inelastic. Therefore, a price increase will lead to an increase in total revenue for both periods, with a greater increase during peak hours due to the lower elasticity.

Elasticity of Demand for Bus Services Is 0