Answer to Question #86931 in Microeconomics for zwavhudi nemasetoni

Question

4. You are still the CEO of Metrorail. Analysts have determined that the price elasticity of 1,4 is a weighted average figure. During peak hours in the morning and evening the price elasticity of demand is 0,8 and during the rest of the day it is 2,6. How would this information affect your pricing strategy? (4 marks)

Answer 1

Since we are talking about the cost of travel in the subway, then the pricing policy is quite a moderately weighted indicator. since this service can be attributed to the "essential" group. in case of an excessive increase in prices during rush hours, people will begin to give preference to other types of transport, and even more so in another, free time