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How Prices Change Impact Demand

In: Business and Management

Submitted By mx85379
Words 1386
Pages 6
Since the new pricing introduced to two Harbour crossings for the southbound traffics, we have seen there is only a bit change in traffic use volume in Harbor bridge and Harbor tunnel.
As the calculation indicated, the demands of using Harbour bridge and Harbour Tunnel are generally pricing inelastic except the use of Harbour Tunnel between 5:30am to 6:30am, of which the demand is pricing elastic.
The fact that increasing and decreasing prices from $3 dollars flat fee before to multi pricing system determined by the pick and off-pick traffic hours seems not change the traffic volume with Harbour bridge at all time zone, and with Harbour Tunnel at most of the time expect 5:30am to 6:30am.
The elasticity of demands are explained by four reasons availability of substitutes, time horizon, necessities or luxuries and purchase capacity in theory. Practically, as price goes more expensive, traveller might find substitutes such as training, busses, fairies and detour (i.e. Parramatta road, ANZ bridge) replacing the costly Harbour crossings. In this case the substitutes are not effectively replacing the Harbour crossings for the private car. Travellers are reluctant to change the means of travels (i.e. Ferry, train, busses) due to their own lifestyle, they remain driving across Harbour by paying extra cost. Detouring via Parramatta road or ANZ bridge are not attractive enough due to the over capacity of road usage and extra miles to drive, private car traveller would consider paying extra for the Harbour crossing is far better off. Secondly time horizon it may change the price elasticity in a long run but not in short. In this case whereby 12 months’ time horizon is not long enough for neither government nor traveller make their effort to change. For instances, government might build more bridges and tunnel across the Harbours; travellers might move their homes

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