Explore BrainMass
Share

# Price and Income Elasticity calculations

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

I am trying to work on the 3 questions below and am having a problem with calculating these, and am after an answer to review for each, so that I can see the method used and then apply to other questions and work required. Data below

1. Calculate the price elasticity using 1992 data

The ratio of the percentage change in quantity demanded to the percentage change in price, , assuming that all other factors influencing demand remain unchanged

2. Calculate the income elasticity using 1992 data

The ratio of the percentage change in quantity to the percentage change, assuming that all other factors influencing demand remain unchanged

3. If the fare in increased to \$1.50, what is the expected impact on weekly revenues to the transit system if all other variables remain at there 1992 levels

STA Data on Transit Ridership in Word file attached as well.... is clearer

Year Weekly Riders (Y) (x 1,000) Price (P) per Ride (Cents) Population (T) (x 1,000 Income (I) Parking Rate (H) (Cents)

1966 1200 15 1800 2900 50
1967 1190 15 1790 3100 50
1968 1195 15 1780 3200 60
1969 1110 25 1778 3250 60
1970 1105 25 1750 3275 60
1971 1115 25 1740 3290 70
1972 1130 25 1725 4100 75
1973 1095 30 1725 4300 75
1974 1087 30 1720 4400 75
1975 1087 30 1705 4600 80
1976 1080 30 1710 4815 80
1977 1020 40 1700 5285 80
1978 1010 40 1695 5665 85
1979 1010 40 1695 5800 100
1980 1005 40 1690 5900 105
1981 995 40 1630 5915 105
1982 930 75 1640 6325 105
1983 915 75 1635 6500 110
1984 920 75 1630 6612 125
1985 940 75 1620 6883 130
1986 950 75 1615 7005 150
1987 910 100 1605 7234 155
1988 930 100 1590 7500 165
1989 933 100 1595 7600 175
1990 940 100 1590 7800 175
1991 948 100 1600 8000 190
1992 955 100 1610 8100 200

#### Solution Preview

Price and Income Elasticity

I am trying to work on the 3 questions below and am having a problem with calculating these, and am after an answer to review for each, so that I can see the method used and then apply to other questions and work required. Data below

1. Calculate the price elasticity using 1992 data

The ratio of the percentage change in quantity demanded to the percentage change in price, , assuming that all other factors influencing demand remain unchanged

Price(OLD)=15
Price(NEW)=100
QDemand(OLD)=1500
QDemand(NEW)=955
First we'd calculate the percentage change in quantity demanded: [QDemand(NEW) - QDemand(OLD)] / QDemand(NEW)
By filling in the values we wrote down, we get:
[1500 - 955] / 955 = (545/955) = 0.5707 (Again we leave this in decimal form)
Then we'd calculate the percentage change in price:
[Price(NEW) - Price(OLD)] / Price(OLD)
By filling in the values we wrote down, we get:
[15-100] / 100 = (-85/100) = -0.85
We then use these figures to calculate the price-elasticity of demand:
PEoD = (% Change in Quantity Demanded)/(% Change in Price)
We ...

#### Solution Summary

Price and Income Elasticity calculations are achieved.

\$2.19