You have been hired by the city to determine whether or not an increase in the price of tickets for the mass transit system would raise system revenues. The debate has been heated and the city council seems to be divided. One side argues that in order
to increase revenues from the transit system, prices must be increased. The opposing side argues that a price increase at this time will lower revenues. What assumptions are each side making about the price elasticity of demand, and how might you determine the best course of action?
The side that is arguing that revenues will decline as a result of an increase in the price of mass transit tickets is assuming that the demand is elastic. Those that argue that an increase in price will result in greater revenues believe that the price elasticity of demand for mass transit systems is inelastic. You might advise an increase in the price of transportation fares in order to identify whether demand is elastic or inelastic.
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"If the official settlements balance is zero, a current account surplus implies an equal capital and financial account deficit." Is the previous statement correct or incorrect? Briefly explain your answer
What will be an ideal response?
An economic system is the set of rules that define _______ and _______.
A) resources; prices B) who gets to vote; when elections will be held C) market prices; factors of production D) how an economy's resources are to be owned; how decisions about the resources are to be made