Computation of arc elasticity of demand

Reference no: EM1313029

Riders for Nippon's Monorail

In October 1968 the Tokyo monorail Company denied that it was facing bankruptcy. It stated that its operating results were much improved since it had reduced its fare from 250 yen to 150 yen (70 cents to 42 cents) on its 12-mile run from Tokyo airport to the center of the city and by equivalent percentages on shorter commuter runs.

1. Assume that this price cut was completely responsible for its increase in revenues from 460 million yen in 1966 to 640 million yen in 1967.

2. Calculate the indicated arc elasticity of demand.

(Hint: As a unit of quantity, use the full-trip equivalent).

P	Q	Revenue	Elasticity
1966		460,000,000
1967		640,000,000

Reference no: EM1313029

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