Score 7/31/2018 11:55 PM 62.2/100 Gradebook Question 10 of 15 Incorre ect Saplin

Question

Score 7/31/2018 11:55 PM 62.2/100 Gradebook Question 10 of 15 Incorre ect Sapling Learning 95 The Acmevilile Metropolitan Bus Service currently charges s0.77 for an all-day ticket, and is used by an average of 472 riders a day. The bus company is not earning a profit, but according to their the city, they cannot cut the number of buses on the road. They revenues must therefore find a way to increase The bus company is consi indicate this price increase would reduce usage to 322 riders per day. increasing the ticket price to $0.88. The marketing department's studies Calculate the price elasticity of demand using the midpoint method for bus tickets to determine if the bus company should increase price or decrease price to increase revenues. Enter your answer as an absolute value and round it to two places after the decimals lick to edit Price elasticity of demand is Tools O Demand is elastic, so decreasing tckerprices will increase revenue. O Demand is inelastic, so increasing ticket prices will increase revenue. O Demand is inelastic, so decreasing ticket prices will increase revenue O Demand is elastic, so increasing ticket prices will increase revenue & Give Up & View Hint help

Explanation / Answer

The formula for Midpoint Method of Price Elasticity of Demand is:

PED=[(Q2?Q1)÷(Q2+Q1)/2] / [(P2?P1)÷(P2+P1)/2]

=Percent Change in Quantity / Percent Change in Price

where:

PED= [(322?472)÷(322+472)/2] / [(0.88USD?0.77USD)÷(0.88USD+0.77USD)/2]

= -2.834

absolute value and two decimal places= 2.83

Demand is elastic, so decreasing ticket prices will increase revenue.

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