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Homework answers / question archive / You are on the manager of NYC Transit Authority with the responsibility to decrease annual Bus and Subway fares

You are on the manager of NYC Transit Authority with the responsibility to decrease annual Bus and Subway fares

Economics

You are on the manager of NYC Transit Authority with the responsibility to decrease annual Bus and Subway fares. You would recommend a decrease in the annual fares only if you thought the demand curve for the City Bus and Subway system was:

a. Inelastic

b. Elastic

c. Unitary elastic

d. Perfectly elastic

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The correct answer is C unitary elastic.

The unitary elastic demand implies that the change in the demand for goods in the society changes proportionally with their prices. For instance, the decrease in demand for the buses will result in lower prices, which will be equal to the reduced fares. Therefore, the proportionate change will have a beneficial factor to the employees as they would not be highly affected by lowering their fares.

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