Answer to Question #103852 in Macroeconomics for Izzy

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.