Taxi fares in Cleveland are set by the city government.Suppose that the local taxi companies petition the city council to raise taxi fares.Despite the fact that higher fares will ________ the quantity demanded for taxi cab rides,the taxi companies must believe that demand for taxis is ________ and therefore that revenue will ________.
A) decrease; inelastic; increase
B) decrease; elastic; increase
C) decrease; inelastic; decrease
D) increase; inelastic; increase

Question

Quizplus · Accepted Answer

The taxi companies must believe that demand is inelastic, meaning that the percentage decrease in quantity demanded is less than the percentage increase in price, leading to an increase in total revenue despite the decrease in quantity demanded.

Taxi Fares in Cleveland Are Set by the City Government