Differences in lasticity of demand-expenditure on a good

Reference no: EM133295101

Assignment:

This question is based on the relationship between the elasticity of demand and the expenditure on a good. And when we say demand is elastic we mean the absolute value of elasticity is greater than 1. Inelastic means the absolute value of elasticity is less than 1.) Suppose there is a 5-mile-long toll road in the city of Wakanda. The toll road is owned and operated by the city government. The current toll is $5 and 10 thousand cars take the toll road every day. The city government wants to increase the toll revenue and hires you as a consultant. Would you advise the government to increase the toll or reduce the toll? Using a numerical example show how the answer depends on whether the demand is elastic or inelastic.

Reference no: EM133295101

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