a) The Olde Yogurt Factory has decreased the price of its popular Mmmm Sundae from $2.25 to $1.75. As an outcome, the firm's daily sales of these sundaes have raised from 1,500/day to 1,800/day. Calculate the arc price elasticity of demand over this price and consumption quantity range.
b) The subway fare in your town has just been raised from a present level of 50 cents to $1.00 per ride. As a result, the transit authority notes a decline in rider-ship of 30 percent.
i) Calculate the price elasticity of demand for subway rides.
ii) If the transit authority decreases the fare back to 50 cents, what impact would you wait for on the ridership? Explain why?