When a public transit system (such as a subway or bus line) raises its fares, it may experience an increase in total revenue.This suggests that demand is:
A) unstable.
B) price inelastic.
C) price elastic.
D) unit price elastic.

Question

Quizplus · Accepted Answer

If raising the fares leads to an increase in total revenue, then it suggests that demand is price inelastic. This means that the increase in price is not enough to significantly decrease the quantity demanded, allowing the transit system to retain a significant portion of its original revenue. In contrast, if demand were price elastic, then raising fares would significantly decrease the quantity demanded, resulting in a decrease in total revenue. If demand were unit price elastic, then the increase in price would be proportional to the decrease in quantity demanded, resulting in no change in total revenue.

When a Public Transit System (Such as a Subway or Bus