Presented below are passenger figures for public transport services in a particular city: Transport Mode: Annual usage

Presented below are passenger figures for public transport services in a particular city: 

Transcribed Image Text:

Transport Mode: Annual usage (millions): The following elasticities apply Income elasticity of demand: Rall 38 Quantity Rail 0.41 Rail Bus 90 -0.45 0.08 0.02 Bus -0.50 Price Bus Underground Own & cross price elasticities Rall Bus Underground Note: modes llisted on rows relate to the quantity change in demand, those listed in columns relate to change in price -0.40 -0.40 0.05 23 Underground 0.32 Total 151 Underground -0.30 0.10 -0.20 Using all of these values you should be able to answer the following questions: a) If there is a 5 per cent rise in income, what would be the new daily modal splits and the new total daily usage? b) Using your answer for the new total daily usage from part (a), what is the overall income elasticity to travel? c) Calculate the effect on modal splits and the new monthly usage of the impact of the following factors (each should be considered on its own) and from your answers highlight which modal fare has the largest impact on the overall demand for travel in this city. I. a 15 per cent increase in the level of rail fares II. a 15 per cent increase in the level of bus fares III. a 15 per cent increase in the level of underground fares d) What might be expected to happen to the cross price elasticity of the train across all other modes if the level of rail travel was to significantly increase? Why would this happen? Transport Mode: Annual usage (millions): The following elasticities apply Income elasticity of demand: Rall 38 Quantity Rail 0.41 Rail Bus 90 -0.45 0.08 0.02 Bus -0.50 Price Bus Underground Own & cross price elasticities Rall Bus Underground Note: modes llisted on rows relate to the quantity change in demand, those listed in columns relate to change in price -0.40 -0.40 0.05 23 Underground 0.32 Total 151 Underground -0.30 0.10 -0.20 Using all of these values you should be able to answer the following questions: a) If there is a 5 per cent rise in income, what would be the new daily modal splits and the new total daily usage? b) Using your answer for the new total daily usage from part (a), what is the overall income elasticity to travel? c) Calculate the effect on modal splits and the new monthly usage of the impact of the following factors (each should be considered on its own) and from your answers highlight which modal fare has the largest impact on the overall demand for travel in this city. I. a 15 per cent increase in the level of rail fares II. a 15 per cent increase in the level of bus fares III. a 15 per cent increase in the level of underground fares d) What might be expected to happen to the cross price elasticity of the train across all other modes if the level of rail travel was to significantly increase? Why would this happen?

Answer rating: 100% (QA)

a The new daily modal split would be Underground 306 Bus 260 Rail 434 The new total daily usage would be Underground 153 Bus 154 Rail 155 Assuming a 3 increase in income we would expect the demand for ... View the full answer