For this Discussion Board assignment, you must respond to the following questions:
The New York Times (Feb. 17, 1996) reported that subway ridership declined after a fare increase: “There were nearly four million fewer riders in December 1995, the first full month after the price of a token increased 25 cents to $1.50 than in the previous December, a 4.3 percent decline.”
1. Use these data to estimate the price elasticity of demand for subway rides.
2. According to your estimate, what happens to the Transit Authority’s revenue when the fare rises?
3. Why might your estimate of the elasticity be unreliable?
4. What are some factors that affect the price elasticity of demand for subway rides?
5. Could the supply curve for subway rides be changing while the demand curve is changing? Explain.
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