Solved: Assume that Norfolk and Virginia Beach build a light rail commuter lin

Question

Assume that Norfolk and Virginia Beach build a light rail commuter line connecting downtown Norfolk with Virginia Beach. This rail service benefits both communities by enabling residents of both cities to visit the other, cheaply and safely. It helps eliminate parking problems, and it promotes commerce in both places. However, we are concerned about the financial viability of such a service. This depends upon ridership and total revenues. Show your calculations. Assume the following demand curve for daily train tickets: Qd=100,000 30,000P a) What is the price elasticity of demand for train tickets if the price is $2.00 per ticket? b) Interpret this price elasticity of demand in words. c) Using the price elasticity computed above, assume that the price falls from $2.00 to $1.50 per ticket. What will be the percentage change in train ticket sales? d) Draw a rough sketch of a linear demand curve. On the curve, show the elastic region, the unit elasticity point, and the inelastic region. Be sure to label all parts of the diagram.