The tricities bus company is a regional bus line providing

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Reference no: EM13375622

The Tricities Bus Company is a regional bus line providing transit service between Coquitlam, Port Moody and Port Coquitlam. An analysis of the monthly demand for transit reveals the following demand equation:

Q_x = 1,750 - 40P_x - 15PC + 30BAI - 1,700S

Where Q_x is quantity measured by the number of passengers per month, P_x is the price, PC is a price index for connecting bus routes, BAI is a business activity index and S, a binary or dummy variable, equals 1 in summer months, zero otherwise.

Currently P_x = 50, PC = 120, and BAI = 175.

(a) Calculate the quantity demanded during the winter month of January if all price-related variables are as specified above.

(b) Calculate the price elasticity of demand in winter for transit services and the cross-price elasticity of demand for transit with respect to the level of business activity.

(c) What price would you recommend the Tricities Bus company charge in the winter months if they were primarily interested in maximizing revenue?

(d) Calculate the quantity demanded during the summer month of August if all price-related variables are as specified above.

(e) Calculate the price elasticity of demand in summer for transit services and the cross-price elasticity of demand for transit with respect to the level of business activity.

(f) What price would you recommend the Tricities Bus company charge in the summer months if they were primarily interested in maximizing revenue?

Reference no: EM13375622

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