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(d) Calculate the percentage of the total tax imposed that is: (i) paid by the buyers per unit: (ii) paid by the sellers per unit. 2. A public transport company recently increased the price of its service on a particular high traffic route from 12 to 15 per trip, this resulted in a reduction in the number of commuters from 600 to 580 per day. Use the information above to answer the questions that follow. (a) Calculate the: (bar (x)) percentage increase in the price of its service; (ii) percentage decrease in the number of commuters; (iii) coefficient of price elasticity of demand for its service. (b) Is the demand for the company's transport service price clastic or inelastic? Give a reason for your answer. ria

Question

(d) Calculate the percentage of the total tax imposed that is:
(i) paid by the buyers per unit:
(ii) paid by the sellers per unit.
2.
A public transport company recently increased the price of its service on a particular
high traffic route from 12 to 15
per trip, this resulted in a reduction in the number of
commuters from 600 to 580 per day. Use the information above to answer the questions
that follow.
(a) Calculate the:
(bar (x)) percentage increase in the price of its service;
(ii) percentage decrease in the number of commuters;
(iii) coefficient of price elasticity of demand for its service.
(b) Is the demand for the company's transport service price clastic or inelastic? Give a
reason for your answer.
ria

(d) Calculate the percentage of the total tax imposed that is: (i) paid by the buyers per unit: (ii) paid by the sellers per unit. 2. A public transport company recently increased the price of its service on a particular high traffic route from 12 to 15 per trip, this resulted in a reduction in the number of commuters from 600 to 580 per day. Use the information above to answer the questions that follow. (a) Calculate the: (bar (x)) percentage increase in the price of its service; (ii) percentage decrease in the number of commuters; (iii) coefficient of price elasticity of demand for its service. (b) Is the demand for the company's transport service price clastic or inelastic? Give a reason for your answer. ria

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XavierVeteran · Tutor for 11 years

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(i) The percentage increase in the price of its service is \(25\%\).<br /><br />(ii) The percentage decrease in the number of commuters is \(3.33\%\).<br /><br />(iii) The coefficient of price elasticity of demand for its service is \(-0.1332\).<br /><br />(b) The demand for the company's transport service is price inelastic because the absolute value of the coefficient of price elasticity of demand is less than 1.

Explain

## Step 1: Calculate the percentage increase in the price of the service.<br />The initial price is \(\$12\) and the new price is \(\$15\).<br /><br />### Formula:<br />\[\text{Percentage Increase} = \left( \frac{\text{New Price} - \text{Initial Price}}{\text{Initial Price}} \right) \times 100\]<br /><br />### Calculation:<br />\[\text{Percentage Increase} = \left( \frac{15 - 12}{12} \right) \times 100 = \left( \frac{3}{12} \right) \times 100 = 25\%\]<br /><br />## Step 2: Calculate the percentage decrease in the number of commuters.<br />The initial number of commuters is 600 and the new number is 580.<br /><br />### Formula:<br />\[\text{Percentage Decrease} = \left( \frac{\text{Initial Number} - \text{New Number}}{\text{Initial Number}} \right) \times 100\]<br /><br />### Calculation:<br />\[\text{Percentage Decrease} = \left( \frac{600 - 580}{600} \right) \times 100 = \left( \frac{20}{600} \right) \times 100 = 3.33\%\]<br /><br />## Step 3: Calculate the coefficient of price elasticity of demand for its service.<br />The coefficient of price elasticity of demand (\(E_d\)) is calculated using the percentage change in quantity demanded and the percentage change in price.<br /><br />### Formula:<br />\[E_d = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}}\]<br /><br />### Calculation:<br />\[E_d = \frac{-3.33\%}{25\%} = -0.1332\]<br /><br />## Step 4: Determine if the demand is price elastic or inelastic.<br />A demand is considered elastic if \(|E_d| > 1\) and inelastic if \(|E_d| < 1\).<br /><br />### Analysis:<br />Since \(|E_d| = 0.1332\), which is less than 1, the demand is inelastic.<br /><br />### Reason:<br />The percentage change in quantity demanded is less than the percentage change in price.
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