Author Question: Consumer spending is considered a determinant of economic growth. a. True b. False Indicate ... (Read 52 times)

SGallaher96 · **on:** Jun 30, 2018

Consumer spending is considered a determinant of economic growth.
a. True
b. False
Indicate whether the statement is true or false

Question 2

You have been hired by the city to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues. The debate has been heated and the city council seems to be divided. One side argues that in order to increase revenues from the transit system, prices must be increased. The opposing side argues that a price increase at this time will lower revenues. What assumptions are each side making about the price elasticity of demand, and how might you determine the best course of action?

eliasc0401 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

False

Answer to Question 2

The side that is arguing that revenues will decline as a result of an increase in the price of mass transit tickets is assuming that the demand is elastic. Those that argue that an increase in price will result in greater revenues believe that the price elasticity of demand for mass transit systems is inelastic. You might advise an increase in the price of transportation fares in order to identify whether demand is elastic or inelastic.