the acmeville metropolitan bus service currently charges $0.99 for an all-day ticket and is used by an average of 623 riders a day. the bus company is not earning a profit, but according to their contract with the city, they cannot cut the number of buses on the road. they must, therefore, find a way to increase revenues. the bus company is considering increasing the ticket price to $1.21 . the marketing department's studies indicate this price increase would reduce usage to 473 riders per day.

Therefore, the PED is 1.37, which means it is elastic and sales decrease when price increases.

What is PED
Price elasticity of demand is the percentage change in quantity demanded of a good or service divided by the percentage change in price. Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Elasticity can be classified into five broad categories: fully elastic, elastic, fully inelastic, inelastic, and unitary. Elasticity of supply or demand is one whose elasticity is greater than 1 and exhibits high responsiveness to price changes. Inelastic demand or supply is one with elasticity less than 1, indicating a poor response to price changes. Unit elastics describe the proportional responsiveness of demand or supply.

PED formula
[tex]P E D=\frac{\left(Q_{2}-Q_{1}\right) /\left[\left(Q_{2}+Q_{1}\right) / 2\right]}{\left(P_{2}-P_{1}\right) /\left[\left(P_{2}+P_{1}\right) / 2\right]}[/tex]

To learn more about PED
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