Question

After a recent study showed significant benefits to the use of public transportation, government officials have hired your consulting firm to increase its use. in the initial meeting between the government officials and your consulting firm, some ideas for increasing demand were discussed. here are three of those suggestions. suggestion 1. reduce the price of public transportation. suggestion 2. increase the price of private transportation by increasing tolls. suggestion 3. offer monthly and yearly passes that reduce the price paid per ride. based on your knowledge of the law of demand, which suggestion(s) would you recommend?

Answer 1

In function of the good service that must have in public transport and the welfare for the citizens another suggestion and possible resource that can be taken in this respect is to combine those initial ideas in function of the efficiency that these decisions provide. Reduce the price, you can decrease the income for maintenance, therefore you can freeze for time. Increasing the price may lead to rejection by users and an impact on their economy, however, it must be increased at a reasonable time. The monthly and annual passes are part of a balanced idea. In view of the acceptance of users there is more demand therefore the third idea must be complemented and offer passages of reduction of prices per trip that do not affect both economies of companies and users.