question archive The application of elasticity is very useful in evaluating the possible effects that a change in the price of a good or service has on total revenue collected
The application of elasticity is very useful in evaluating the possible effects that a change in the price of a good or service has on total revenue collected
Subject:EconomicsPrice:2.88 Bought3
The application of elasticity is very useful in evaluating the possible effects that a change in the price of a good or service has on total revenue collected. Consider the use of public transportation in a metropolitan environment. If the subway and bus system decides it needs more revenue, should it raise or lower the price of a ride? How will this affect the demand for other forms of travel such as car traffic and the use of taxis and Uber ridership? Make sure to consider the elasticity of demand for the good or service in question as well as the elasticity of demand for close substitutes.
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For the subway and bus system to generate more revenue, they should lower the price of a ride. By doing so, the subway and bus system will attract more clients since most individuals tend to prefer the cheaper alternative when the services offered by different entities are similar.
The subway and bus system have the advantage of economies of scale since they can transport many people compared to the other substitutes available.
Lowering the price per ride will result in other forms of transportation such as car traffic, taxis, and uber ridership receiving fewer clients than when the bus and subway system had not lowered the price per ride.
This situation will increase elasticity between the subway and bus system in comparison to other transportation substitutes available.
