Elastic and Inelastic demand
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1. A regulated transportation monopoly is losing money. The Monopoly goes to its government regulators with a request to raise their rates (price). An economist on the regulatory commission says that raising rates will bring in less revenue as customers change to substitute forms of transportation. The Monopoly and the economist have different views of the elasticity of demand for the monopoly's transportation services. Which one thinks the demand is inelastic and which one thinks it is elastic?
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The monopoly thinks that the demand is inelastic and the economist thinks that the demand is elastic.
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