How does the elasticity of demand affect a bus company's revenue generation strategies?

The elasticity of demand significantly influences a bus company's revenue generation strategies. If demand is elastic, meaning passengers are sensitive to price changes, the company may focus on keeping fares low or providing discounts to attract more customers. Conversely, if demand is inelastic, with passengers less sensitive to price changes, the company could increase prices without significantly reducing ridership, thereby increasing revenue.

For example, in off-peak times when the demand might be more elastic, the company might use promotional fares to increase ridership. In contrast, during peak times, if demand is inelastic, the company might employ a higher fare strategy.

It's also important to consider cross-elasticity of demand, which in the context of a bus company might mean the impact of the prices of alternative forms of transportation (like rail or taxi services) on the bus company's pricing strategy.

Further reading on this subject can be found on Wikipedia's article on Price Elasticity of Demand.