Question

A transit company charges $1.25 per ride and currently averages 27,500 riders per day. The company needs to increase revenue but found that for each $0.10 increase in fare the company would lose 1000 riders. What should the company charge to maximize revenues?

Answer 1

Charge the additional $0.10 even if you loose 1000 riders

Explanation:

Original:

27,500 x $1.25 = $34,375

Charge additional $0.10 but loose 1000 riders:

(27,500 - 1000) x ($1.25 + $0.10)

26,500 x $1.35 = $35,775