One group of people uses New York City subways only during rush hour to travel to and from work. Another group uses them only in midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare?
a. The rush-hour group because its demand for subway service is more elastic than that of the midday group.
b. The rush-hour group because its demand for subway service is less elastic than that of the midday group.
c. The midday group because its demand for subway service is more elastic than that of the rush-hour group.
d. The midday group because its demand for subway service is less elastic than that of the rush-hour group.
e. It doesn't matter because both groups have the same elasticity of demand.
Question 2
Which of the following describes a situation in which demand must be elastic?
a. Total revenue increases by 15 percent when the price of corndogs rises by 15 percent.
b. Total revenue increases by less than 15 percent when the price of corndogs rises by 15 percent.
c. Total revenue decreases by more than 15 percent when the price of corndogs rises by 15 percent.
d. Total revenue increases by 15 when the price of corndogs rises by 15.
e. Total revenue increases by more than 15 when the price of corndogs rises by 15.
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