Suppose you are the manager of the state transport company and your finance officer has just told you that the company is making losses .To reverse the losses been made by STC,your decide to cut transport service to certain destination but your board of directors do not want you to cut service,which means that you cannot cut costs.Your only hope is to increase revenue. You result the economist on your staff who has researched studies on public transportation elasticity and she reports that the estimated price.Elasticity of demand for the first few month after a price change is about -0.3 but the that after several year ,it will be about-1.5 i. Labourii. Capitaliii. Natural Resources(b) Explain whether each of the following is labour, capital, or a natural resource.An unemployed factory workerii. A University professoriii. The library building on campusi.iv. Kakum National Parkv. An untapped deposit of natural gas5. A Science Laboratory Technology student, Kofi Mensah, often purchases toffees or bagsof plantain chips between lectures; he tries to limit his spending on these snacks to C8 perweek. A bag of plantain chips costs C0.75 and costs C0.50 per unit on campus. He hasbeen purchasing an average of 6 bags of plantain chips and 7 toffees each week. Mr.Mensah is a careful maximizer of utility, and he estimates that the marginal utility of anadditional bag of chips during a week is 6. In your answers use T to denote toffees and Pto denote plantain chips.(a) How much is he spending on snacks?(b) How does this amount compare to his budget constraint?(c) What is the marginal utility of an additional toffee during the week? 6. Suppose you are the manager of the State Transport Company (STC) and your financeofficer has just told you that the company is making losses. To reverse the losses beenmade by STC, you decide to cut transport services to certain destinations but your boardof directors do not want you to cut services, which means that you cannot cut costs. Youronly hope is to increase revenue.You consult the economist on your staff who has researched studies on publictransportation elasticities and she reports that the estimated price elasticity of demand forthe first few months after a price change is about -0.3, but that after several years, it willbe about -1.5.(a) Explain why the estimated values for price elasticity of demand differ.Calculate what will happen to ridership and revenue over the next few months ifdecide to raise fares by 5%.(c) Compute what will happen to ridership and revenue over the next few years if youdecide to raise fares by 5%.(d) What happens to total revenue now and after several years if you choose to raise fares?no.

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Suppose you are the manager of the State Transport Company (STC) and your finance officer has just told you that the company is making losses. To reverse the losses been made by STC, you decide to cut transport services to certain destinations but your board of directors do not want you to cut services, which means that you cannot cut costs. Your only hope is to increase revenue. You consult the economist on your staff who has researched studies on public transportation elasticities and she reports that the estimated price elasticity of demand for the first few months after a price change is about -0.3, but that after several years, it will be about -1.5. (a) Explain why the estimated values for price elasticity of demand differ. (b) Calculate what will happen to ridership and revenue over the next few months if you decide to raise fares by 5%. (c) Compute what will happen to ridership and revenue over the next few years if you decide to raise fares by 5%. (d) What happens to total revenue now and after several years if you choose to raise fares?

Suppose you are the manager of the State Transport Company (STC) and your finance officer has just told you that the company is making losses. To reverse the losses been made by STC, you decide to cut transport services to certain destinations but your board of directors do not want you to cut services, which means that you cannot cut costs. Your only hope is to increase revenue. You consult the economist on your staff who has researched studies on public transportation elasticities and she reports that the estimated price elasticity of demand for the first few months after a price change is about -0.3, but that after several years, it will be about -1.5. (a) Explain why the estimated values for price elasticity of demand differ. (b) Calculate what will happen to ridership and revenue over the next few months if you decide to raise fares by 5%. (c) Compute what will happen to ridership and revenue over the next few years if you decide to raise fares by 5%. (d) What happens to total revenue now and after several years if you choose to raise fares?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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