You are Lori Lightfoot. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3 What are the elasticites for gas tax and increase in CTA fares using the mid point method?

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

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 4E

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You are Lori Lightfoot. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3…
You are Lori Lightfoot. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3…
img' (a If po increases, what happens to the demand and supply of public transportation (shifts left/shifts right/doesn’t change) What happens to the equilibrium quantity and price for public transportation? (increase/decrease) (b)At a given price p, as oil becomes more expensive (po increases), does the (own) price elasticity of demand for public transportation increase / decrease / stay the same? (c) Calculate the cross-price elasticity of public transportation demand with respect to the oil price po, at the point p = 1 and po = 2. Are the two goods (public transportation and oil) substitutes or complements, or unrelated?
You are Brandon Johnson. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3…
Under which circumstances does line tax burden fall entirely on consumers?
What effect does a per-gallon tax on gasoline have on the market for gasoline? Who pays for the increase in tax?
You are Lori Lightfoot. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 4.00 1.1 1.75 3.50 1.2 1.50 10 3.00 1.3 Answer the following questions 1. Are the 2 demand curves straight lines? Is the elasticity constant on each curve at each price? If so, what is it? If not, what is it? 2. Is one strategy better than the other (just from a money perspective)? Why? Does it depend on where the tax/fare is instituted? 3. From what you know of elasticity and the real world, is raising the price the best policy? Given your answer, do all consumers share equally in the tax? Your answers should be complete enough to answer each question.
12. In the nation of Transporta, the income elasticity of demand for used cars is -2.66. So when incomes in this nation increase by 10 percent A. the quantity of used cars demanded will decrease by 26.6 percent. B. used cars will be normal goods. C. the quantity of used cars demanded will increase by 26.6 percent. D. the demand curve for used cars will shift rightward. 14. Which of the following represents a price elastic supply? A. The quantity supplied increases by 21 percent as a result of an increase in the price of 12 percent. B. The quantity demanded increases 18 percent as a result of a decrease in the price of 8 percent. C. The price rises by 22 percent causing the quantity supplied to increase by 3 percent. D. The price rises by 8 percent causing the quantity demanded to fall by 10 percent.
12. Problems and Applications Q4 A company is considering building a bridge across a river. The bridge would cost $2 million to build and nothing to maintain. The following table shows the company's anticipated demand over the lifetime of the bridge: Price Quantity (Dollars per crossing) (Thousands of crossings) 8 50 100 150 4 200 3 250 2. 300 350 400
1. What sort of product is alcohol in economic terms if the government wants to restrict consumption of it? 2. Analyze the social costs of alcohol 3. Analyze the factors that would determine the impact of a price increase on the consumption of alcohol. Is introducing a minimum price a better way of reducing consumption than trying to change peoples’ attitudes?
6. Elasticity and total revenue The following graph shows the daily demand curve for bikes in Chicago. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. 120 110 Total Revenue 100 90 80 70 60 40 A 30 20 10 Demand 16 24 32 40 48 56 64 72 80 88 96 QUANTITY (Bikes) PRICE (Dollars per bike) 50
1. You want to earn extra money to take your family to Disney Land so you debate whether you should increase your price or not. If your business sells 800 units per month at $20/unit. And studies reveal that your product loses 5% of it customers with every $1 increase in price. If you increase your price to $23. *You must show all of your calculations and identify the type of elasticity for the product for full marks What is the coefficient for the elasticity of demand? _________ [2] Identify the type of elasticity. _________________ [1] What would you recommend to the owner in order to help achieve their goal? [2] ____________________________________________________________________

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