The Urban Transit Authority receives the following two pieces of expert advice:

Question

1. “You should cut rail fares in order to encourage greater use. Raising fares will mean fewer customers and lower revenue.”
2. “You cannot afford to cut fares as this will reduce your revenues”
(a) What does each of these pieces of advice assume about the elasticity of demand for rail use?

(b) How might an economist seek to resolve the conflict of opinion?

(c) What factors determine the elasticity of demand for rail use?