# Price and Income Elasticity calculations

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.