(CIVL362)2008_f_quiz1_civl362

(CIVL362)2008_f_quiz1_civl362 - CIVL 362 Transportation...

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CIVL 362 Transportation System Operations Tutorial Quiz 1 (Suggested Solution) Name: Student ID: Week 2, 10 Sep 2008 1. A bus company is charging a flat rate of 50 cents per rider to any part of the city has a patronage of 500,000 per day. It has been decided to raise the fare to 60 cents per rider and it is estimated that 470,000 people will ride the buses. Calculate: a. Price Elasticities: i. Shrinkage ratio 10 0 0 470,000 500,000 50 0.30 60 50 500,000 shr QQP E PPQ == = −− ii. Arc elasticity 1 0 470,000 500,000 60 50 0.3402 60 50 470,000 500,000 arc QQPP E PPQQ −+ + = + iii. Log-arc elasticity log-arc ln ln ln 470,000 ln500,000 0.3394 ln ln ln 60 ln 50 QQ E PP = * Note: E arc ~ E log-arc and E shr > E arc and E log-arc b. Change in total revenue per day (in dollar) $0.60 470,000 $0.50 500,000 $32,000 −× = 2. A bus company found that the price elasticity of demand for bus trips during peak hours is -0.40. Management of the company would like to raise the current fare but don’t know if this action will (a) lead to a reduction in patronage, and (b) result in a loss of revenue for the company. Are these fear justified? Discuss. What if the price elasticity of -1.30.
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(CIVL362)2008_f_quiz1_civl362 - CIVL 362 Transportation...

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