The taxicab fare in Newville is regulated. The fare currently charged is $6 a ride. Newville taxicab drivers want to obtain government's permission to lower the fare, which they think will increase their total revenue. From this we can conclude that the drivers believe that the demand for taxicab rides is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.

Question

Quizplus · Accepted Answer

The drivers believe that lowering the fare will increase total revenue, which implies they think the demand is elastic. In an elastic demand scenario, a decrease in price leads to a proportionally larger increase in quantity demanded, thus increasing total revenue.

The Taxicab Fare in Newville Is Regulated