One group of people uses New York City subways only during rush hour to travel to and from work.Another group uses them only in midday for leisure activity.If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare?
A)The rush-hour group because its demand for subway service is more elastic than that of the midday group.
B)The rush-hour group because its demand for subway service is less elastic than that of the midday group.
C)The midday group because its demand for subway service is more elastic than that of the rush-hour group.
D)The midday group because its demand for subway service is less elastic than that of the rush-hour group.
E)It doesn't matter because both groups have the same elasticity of demand.

Question

Quizplus · Accepted Answer

The rush-hour group has a less elastic demand for subway service because they are using the subway for work and likely have less flexibility in their schedule or alternative transportation options. They may be willing to pay a higher fare to ensure they arrive at work on time, whereas the midday group may have more flexibility in their leisure activities and therefore a more elastic demand for subway service. Therefore, increasing the fare for the rush-hour group would potentially result in a smaller reduction in revenue because they are less likely to switch to alternative transportation options.

One Group of People Uses New York City Subways Only