A ferry in Boston Harbor travels between Hingham (south ofBoston) and Rowes Wharf (downtown Boston). A monthly pass onthis ferry costs $329. The Massachusetts Bay TransitAuthority (MBTA) is considering increasing the price for themonthly pass by 6.7%. Currently the MBTA sells 2,819 monthlypasses on this route to commuters.

a. An estimate for the pricesensitivity of commuters to the monthly pass price is ?= -0.9. Ifthis is the case, how many monthly passes will be sold if the priceis raised by 6.7%?

b. Is the current revenue with thepass price of $329 higher or lower than the expected revenue if theprice is increased by 6.7%?

c. If the -0.9 estimate is a short runelasticity, what is the expected long run number of passes sold andexpected revenue if long run ?= -1.2?