Executive Summary :: Economics

Executive SummaryThis report allow for look for option ways in which the capital of the United Kingdom resistivity can change their damages in order to reduce their loss interms of total revenue. The report pass on both identify and analysethese alternative methods in an attempt to find the most suitable wayof increasing the revenue for the London Underground. The report willalso look at how elasticity plays a key role in determining anydecisions as well as the outcome of these decisions made.The London Underground is at this very time running at a loss and isin urgent need of things being turned around. The London Undergroundmay at one point in the future be privatised. What we need todetermine is how we can increase revenue before it floats so that authority shareholders will be attracted. We must see how prices canbe adjusted in coincidence with the market segments so that revenuecan be increased. elasticity is crucial in our thinking as it canhave a big impact.1.1 DEFINITION OF ELASTICITYElasticity is the concept in economics that measures the reactivity of one variable in response to another variable. Thebest measure of this responsiveness is the proportional or percentchange in the variables. This gives the most running(a) results for anytype or range of data. Thus elasticity is the proportional (orpercent) change in one variable relative to the proportional change inanother variable.The general formula for elasticity isE = percent change in x / percent change in y1.12 DIFFERENCE amid ELASTIC AND INELASTIC DEMANDElastic means something is highly responsive to changes in somethingelse. For example, elastic demand means that the quantity demandedchanges a lot when the price changes. Inelastic demand means that thequantity demanded does not change much when the price changes.2.0 WAYS IN WHICH FARES CAN BE ADJUSTED2.01 OPTION 1One way of adjusting prices can be to decrease the manages for students.Students often use this utility as a means of transp ort to get totheir respective universities. If fare prices are lower, even thoughthe income per ticket is less, it may overall increase sales revenue.Other discounts may also be offered if a quarterly or seasonally trainpass was purchased, which would attract student to this service.2.02 OPTION 2Fare prices can be increased because many people see this service asinelastic as they do not have any other means of transport. A lot ofbusiness people use this service and may well be able to afford to paythe extra cost. However this is a very risky method as it may advertise people to use private transport which may take the business