ECO108 HW6 - ECO 108 Fall 2010 Bo He Name ID Homework 6 Due...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ECO 108 Fall 2010 Bo He Name: __________________________ ID: __________________ Homework 6 Due Monday Oct. 25th, at the beginning of LECTURE 1. You are the manager of the public transit system. Your finance officer has just advised you that the system faces a deficit. Your board doesn’t want you to cut service, which means that you can’t cut costs. Your only hope is to increase revenue. You wonder whether a fare increase would boost revenue. You consult the economist on your staff who has researched studies on public transportation elasticities. She reports that the estimated price elasticity of demand for the first few months after a price change is about –0.5, but that after two years, it will be about –1.5. (a)Explain why the estimated values for price elasticity of demand differ.(6 pts) (b) Compute what will happen to ridership (quantity demanded) over the next few months if you decide to raise fares by 5 percent. (6pts) (c) Compute what will happen to ridership (quantity demanded) over the next few years if you
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/20/2011 for the course ECO 108 taught by Professor Wolman during the Spring '08 term at SUNY Stony Brook.

Page1 / 2

ECO108 HW6 - ECO 108 Fall 2010 Bo He Name ID Homework 6 Due...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online