Explanation:

Introduction:
The statement suggests that if the railways are facing losses on passenger traffic, they should lower their fares. However, whether this remedy would be effective depends on the price elasticity of demand for rail travel. Price elasticity of demand measures the responsiveness of quantity demanded to a change in price.

Price Elasticity of Demand:
Price elasticity of demand can be categorized into three types: elastic, inelastic, and unitary elastic.

1. Elastic Demand:
- Demand is said to be elastic when a change in price leads to a proportionately larger change in quantity demanded.
- In this case, a decrease in fares would result in a significant increase in the quantity demanded, leading to higher revenue despite lower fares.
- If demand for rail travel is highly elastic, lowering fares could result in increased demand, offsetting the losses and potentially increasing overall revenue.

2. Inelastic Demand:
- Demand is said to be inelastic when a change in price leads to a proportionately smaller change in quantity demanded.
- In this case, a decrease in fares would result in a relatively smaller increase in the quantity demanded.
- If demand for rail travel is inelastic, lowering fares may not lead to a significant increase in demand, resulting in lower revenue and potentially exacerbating the losses.

3. Unitary Elastic Demand:
- Demand is said to be unitary elastic when a change in price leads to an equal proportionate change in quantity demanded.
- In this case, a decrease in fares would result in a proportional increase in the quantity demanded.
- If demand for rail travel has unitary elasticity, lowering fares would result in a revenue change that matches the change in cost, leading to no improvement in the financial situation.

Answer:
The correct answer is option B, which states that the demand for rail travel should have a price elasticity of greater than one. This means that if the demand for rail travel is highly elastic, a decrease in fares would result in a greater increase in quantity demanded. This increase in demand can potentially offset the losses incurred due to lower fares and lead to higher overall revenue.

Conclusion:
Lowering fares as a remedy for losses on passenger traffic would only be effective if the demand for rail travel is highly elastic. It is essential for the railways to consider the price elasticity of demand before implementing any fare changes to ensure the desired outcome of increased revenue.