Economics Notes 9.24.07

Economics Notes 9.24.07 - Q 0 = 250,000 trips/day Q 1 =...

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Average person values his/her time at $24/hour - 1 passenger per car - Average travel time is 40 minutes Implicit price/cost of driving in London is $24/60 X 40 = $16/trip Fee = $8/trip Trip time falls to 30 minutes P 1 = [$24/60 X 30 ] + $8 = $20
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Unformatted text preview: Q 0 = 250,000 trips/day Q 1 = 190,000 trips/day Calculate price elasticity: E D = |% change Q D / change price | | [(190,000-250,000)/220,000 X 100] / [($20-$16)/$18 X 100] | = | -27%/22% | = 1.23...
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