A recent study shows the benefits of using public transportation. Government officials have hired your consulting firm to increase the demand for public transportation. They come to you with three of their suggestions. Suggestion 1. Reduce the price of public transportation. Suggestion 2. Increase the price of private transportation by increasing tolls. Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride of public transportation. Which suggestion(s) does your firm recommend?

My firm will suggest 2. Increase the price of private transportation by increasing tolls.

Explanation:

As long as there are substitutes like private transportation, the other incentives for using public transportation won't have much effect.

Price is one of the things that affect demand. Increasing the price of private transportation therefore decreases its demand and makes people look for a cheaper alternative which will then be the public transportation.

The idea is to increase the demand for public transportation. By making the alternative less appealing, more people will be open to public transportation.

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