Answer to Question #298007 in Economics for Afra

Question

Imagine the following scenario. You are considering a pricing strategy for a bus company. The economy is heading into recession, and the company is running at a loss. Your local rail service provider has announced an increase in rail fares. How (if at all) do you use the following information concerning the elasticity of bus travel with respect to various variables to inform your decision on price? Do you raise or lower price?

Price elasticity of demand. -1.58

Income elasticity of demand. - 2.43

Cross-price elasticity of demand with respect to rail fares. +2.21

Your price elasticity of supply. +1.15

Answer 1

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