Purchase Solution

pricing, policy

Not what you're looking for?

Ask Custom Question

The Total operating revenus of a public transportation authority are

$100 million while its total operating costs are $120 million. The

price of a ride is $1, and the price elasticity of demand for public

transportation has been estimated to be -0.4. By law, the public

transportation authority must take steps to eliminate its operating

dificit.
(a) What pricing policy should the transportation authority adopt? Why?
(b) What price per ride must the public transportation authority charge

to eliminate the deficit if it cannot reduce costs?

Purchase this Solution
Solution Summary

Public transport's pricing policy is considered.

Solution Preview

Price = $1
Total Revenues = $100 million
Current demand = $100 million / $1=100 million rides
a) Since the price elasticity of -0.4 is in the inelastic range, increase in price will result in increase in total ...

Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

View More Free Quizzes
Related BrainMass Solutions

  • Pricing Policies: Skimming, Penetration

    513498 Pricing Policies: Skimming, Penetration What pricing objective(s) is a skimming pricing policy most likely implementing? Is the same true for a penetration pricing policy?

  • insurance pricing

    304641 Insurance pricing How does the pricing of an insurance policy for the insurer differ from a bologna manufacture's pricing its product? Why does the difference in pricing problems require that insurance pricing be subject to regulation?

  • International Finance

    What is Dow really trying to accomplish with its new pricing policy? ANSWER.

  • Difference between a Price Policy and A Price Tactic

    405638 Difference between a Price Policy and A Price Tactic Explain the differences between a price policy and a price tactic. Give examples. A price policy is always pricing 10% over cost, for instance.

  • Pricing Strategy and Consumer Behavior

    Predatory pricing: Setting prices low to drive out competitors, then raising prices ( e.g. penetration pricing policy). 4.

  • Customized Pricing

    The various factors which will affect the company's pricing policy are the costs, competitors, positioning, strategy, government regulations etc. Customized pricing Customized pricing is devising individualized pricing to each customer.

  • Retailing Assignment

    policy.

  • Rule of Thumb and Specific Report Explanation

    What this assignment is really getting you to do is to compare the British pricing policy with the policy of cutting prices in order to restore volume.

  • Cost plus pricing

    Emerson has a pricing policy that dictates that a product's price must be equal to full cost plus 60 percent. To calculate full cost, Emerson must estimate the number of unites it will produce and sell in a year.

  • Exchange Rate Considerations

    In your report, include the following: - Compare/contrast the risks and benefits of pricing goods in U.S. dollars or pricing goods in local currency when selling in a foreign market.

View More Related Solutions