Economics, 3rd Edition

Price Sensitivity in the Passenger Train Market

Panel (a) represents the market for train travel between 6.00am and 9.00am between two major cities. The demand for train travel at 

this time is relatively price inelastic – passengers are insensitive to price at this time because they have few alternatives and have to 

get into work and to meetings. The train operators generate revenue of £80,000 by selling 1,000  tickets at £80 each.

Panel (b) shows the market after 9.00am. Train operators face a different demand curve at this time and passengers are more price 

sensitive. If the train operator continued to charge £80, demand would be just 100  and revenue would be £8,000. If the train operator 

reduces the price to £40, demand would be 800  and so the total revenue would be £32,000.

Quantity of train tickets

bought and sold 

Price of

train 

tickets (

£) 

Price of

train 

tickets (

£) 

Quantity of train tickets

bought and sold   

S 

D

i

D

e

80 

0

0 

Panel (a) 

Panel (b) 

S 

80 

1,000 

100 

800 

40