Answer on Microeconomics Question for capitalboy
cents to $1.00 per ride. As a result, the transit authority notes a decline in ridership of 30 percent.
a. Compute the price elasticity of demand for subway rides.
b. If the transit authority reduces the fare back to 50 cents, what impact would
you expect on the ridership? Why?
So the demand for subway rides is inelastic
b. If the transit authority reduces the fare back to 50 cents, there will be an increase in ridership of 30 percent, so the will not be the significant change of demand.
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Price of ride has doubled, so the denominator equals 2
Where the denominator 2 come from?