The Kowloon Motor Bus (KMB) Company Limited has done a research on the price elasticity of demand for bus service. The following table shows that the price elasticity if demand varies in different timeslots of a day.

 

Timeslots	Price Elasticity of Demand
7:00 a.m. - 10:00 a.m.	0.5
10:00 a.m - 5:00 p.p.	1.5
5:00 p.m - 8:00 p.m.	0.7
8:00 p.p. - 12:00 mid-night	2.0

 

Explain the meaning of those numbers of price elasticity of demand, and why the demand for bus service has different levels of price elasticity of demand during different timeslots.

• Timeslot - 7.00 - 10.00 am, Price Elasticity of Demand = 0.5 indicates that the demand is inelastic. % change in the quantity demanded for bus service < % change in the price of buses.
• Timeslot - 10.00 - 05.00 pm, Price Elasticity of Demand = 1.5 indicates that the demand is elastic. % change in the quantity demanded for bus service > % change in the price of buses.
• Timeslot - 5.00 - 08.00 pm, Price Elasticity of Demand = 0.7 again indicates that the demand is inelastic. % change in the quantity demanded for bus service < % change in the price of buses.
• Timeslot - 8.00 - 12.00 midnight, Price Elasticity of Demand = 2 indicates that the demand is highly elastic. A slight fall in the bus ticket prices will have a huge impact on the quantity demanded for buses.

Demand for bus services has different levels of price elasticity. This happens because some of the hours of the day are busiest and some are not. There are numerous factors that influence the price elasticity of demand for bus services during different slots which are the price of bus fare, the availability of substitutes for the product, and so on. During various time allotments, these components continue changing so are the elasticities.