Suppose a subway line determines it can charge different prices to riders during rush hour and riders who travel on the weekend or during off-peak hours. The subway line’s goal is to increase total revenue. The price elasticity of demand for riders during rush hour is -0.70, and the price elasticity of demand for off-peak travelers is -2.10. Based on the price elasticity of demand for each group of people, how should the subway line adjust its prices? Choose one:

A. Lower the price for off-peak travelers, and raise the price for riders during rush hour.
B. Lower the price for off-peak travelers, and keep the price the same for riders during rush hour.
C. Raise the price for off-peak travelers, and keep the price the same for riders during rush hour.
D. Raise the price for off-peak travelers, and lower the price for riders during rush hour.

Subway line determines it can charge different prices to riders during rush hour and riders who travel on the weekend or during off-peak hours. Its goal is to increase total revenue.

To increase total revenue, it should charge a higher price from the riders that have an inelastic demand. This is because with inelastic demand the increase in price will cause the quantity demanded to decrease less than proportionate.

The lower prices should be charged from riders with highly elastic demand. This is because a decrease in price will cause their quantity demanded to increase more than proportionate.