Say the bus authority in your city increased the typical bus fare from $1.00 to $1.50 and that due to this increase total revenue increased by 20%. Based on this we know that the price elasticity of bus rides in your neighborhood is (assume demand curve is linear):

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price increased by 50% (from $1.00 to $1.50), and revenue increased by 20%, indicating that the quantity demanded decreased but not proportionally to the price increase. This suggests inelastic demand, and a price elasticity of 0.4 indicates that the percentage change in quantity demanded is less than the percentage change in price.

Say the Bus Authority in Your City Increased the Typical