Microeconomics: Principles, Applications, and Tools (8th Edition)

Published by Prentice Hall
ISBN 10: 0-13294-886-9
ISBN 13: 978-0-13294-886-9

Chapter 5 - Elasticity: A Measure of Responsiveness - Exercises - 5.2 Using Price Elasticity - Page 122: 2.11b

Answer

Total revenue will increase in the short run but will decrease in the long run.

Work Step by Step

Because the short run elasticity of demand is less than 1, a fare increase will increase total revenue. Because the long run elasticity of demand is greater than 1, a fare increase will decrease total revenue.
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