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?

Question

Matthew

Mathematics

26 May, 04:13

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?

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Answers (1)

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Alissa Carey · Answer 1

Charge the additional $0.10 even if you loose 1000 riders

Step-by-step 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