Gasoline Price Decrease Effect on Price elasticity of Demand For Commuter Rail

What effect on the price elasticity of demand for commuter rail is there likely to be from a decrease in the price of gasoline? Explain your answer.

A decrease in price of gasoline would mean a decrease in fare prices. Price elasticity of demand is the responsiveness of quantity demanded to a change in price. A reduction in price of gasoline will have a positive effect on the quantity of passengers due to reduced prices. Commuter rails are means of transport that are government sponsored and thus a cheap method of transport. It is mostly used by middle and low income earners because it is cheaper than using a personal car.

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However, it is also important to note that a decrease in price of gasoline may consequently result to reduced passengers commuting over the short distances because they will prefer to fuel their own cars and use them for commuting (Gwendolyn, 2011). Commuters that travel over long distances may not really adjust to changes in gas prices. It is equally important to appreciate the fact that changes in gas prices alone do not affect price elasticity of demand. Other factors such as parking fees, traffic, and congestion in these commuter rails have an impact on price elasticity of demand. But generally, a decrease in price of gasoline would consequently lead to reduced prices and this may either increase or reduce demand depending on the distance of travel.

Read also Main Determinants of Elasticity of Demand

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