Suppose you are in charge of a toll bridge that is essentially cost free. The inverse demand for bridge crossings Q is given by P = 20 - Q/3 , where P designates the potential toll fee.
- How many people would cross the bridge if there was no fee.
- What is the loss of consumer surplus associated with the charge of a bridge toll $5?
- As the toll bridge operator you're debating raising the toll to $6. At this higher price, would the toll revenues increase or decrease? What does your answer tell you about the elasticity of demand?