The total operating revenues of a public transportation authority are $100M while its total operatiing costs are $120M. The price per ride is $1, and the price elasticity of demand for transportation ia -0.4. The transportation authority has to eliminate its operating deficit.
(a)What pricing policy should the transportation authority adopt? Why?(b What price per ride must the public transportation authority charge to eliminate the deficit if it cannot reduce costs?
b) suggestion: increase the price of a ride to be $1.50