Question

If taxi fares rise, what will happen to the total revenue received by taxi operators assuming that the elasticity of demand for taxi fares is elastic?

Answer 1

It will decrease. If the elasticity of demand is elastic it means that with changes of price the demand will change too to a large extent. Consequently, after growing up of taxi fares, demand for taxi will fall off, and, as a result, an income of taxi operators will decline.