Suppose Shelly, a candidate running for Mayor, said the following:Not enough people are using the bus; many of our buses run half-empty. If I am elected, I will reduce bus fares.This will get more people to ride the bus and total revenue from bus rides will increase.

a. What is Shelly assuming about the elasticity of demand for bus transit?(1 mark)

b. Let P1 equal the price of bus transit (bus fares) before the decrease in bus fares and P2 to the price of after the decrease. Which of the following graphs better represents the demand curve for bus transit envisioned by Shelly, Graph A or Graph B? Explain your answer(2 marks)

c. From the graph, how would you calculatethe change in total revenuegiven a change in price (X refers to the darker shaded areas and W and Y refer to the lighter shaded areas)?(1 mark)

d. If P1 = $4, P2 = $3, Q1 = 10,000, Q2 = 50,000, Q3 = 60,000 and Q4 = 80,000, calculate the change in total revenue in the case envisioned by Shelly. Show your work.(2 marks)