Question

10. When Title town bus Company raised its bus fare, its total revenues fell. When Petrograd Bus Company raised its bus fare, its total revenue went up. What can we conclude about the elasticity of demand for each Company?

Answer 1

We know

when demand is elastic then there is an inverse relation between price and total revenue

Thus in case of Title town bus company when bus fare increases, total revenue decreases leading elastic demand

in case of Petrograd, revenue increases as bus fare increases which means demand is inelastic.

Thus demand is elastic for Title town bus company and inelastic for Petrograd bus company