Elasticity of Demand for Bus Services Is 0

question 60

Multiple Choice

Elasticity of demand for bus services is 0.23 for the peak hours and 0.42 for off-peak hours. The same percentage increase in price would:

• A) lower revenues for both, but more for peak hours.
• B) raise revenues for both, but more for peak hours.
• C) raise revenue for peak hours but lower revenue for off-peak hours.
• D) lower revenue for peak hours but raise revenue for off-peak hours.

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Definitions:

Variable Expense Ratio

A ratio computed by dividing variable expenses by sales.

Operating Leverage

A financial concept that measures the proportion of fixed costs in a company's cost structure, indicating its sensitivity to changes in sales volume.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.

Net Operating Income

A measure of the profitability of a business's core operational activities, excluding any income or expenses not directly related to its main operations.