Question #72144

To what extent is the concept of elasticity of demand for rail travel a helpful tool in analysing how rail companies go about setting ticket prices on various routes?

Expert's answer

If demand for rail tickets is elastic, then the increase in price will cause the decrease in total revenue and vice versa. If demand for rail tickets is inelastic, then the increase in price will cause the increase in total revenue and the decrease in price will cause the decrease in total revenue.

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