ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -3 Income elasticity Income elasticity reflects how the demand for rail transport service changes if revenue is changed, i.e. if the real income increases, the demand should increase, too.

Detailed explanation-2: -In general, rail demand is less elastic (or stickier) to changes in bus than bus demand is to changes in rail. For example, a 10% fare decrease on rail relative to bus decreases bus demand by 2.8% (ij = 0.28) while a 10% relative decrease in fares by bus acts to decrease rail demand by only 1.5% (ij = 0.15).

Detailed explanation-3: -For passenger transport, reported income elasticity values are predominately in the range 0.5 to 1.4. The evidence indicates that car ownership has a strong, positive, indirect effect on the income elasticity of demand. Some studies, however, do not include this and only report the direct effect of income on demand.

Detailed explanation-4: -As it is usually measured, automobile travel is inelastic, meaning that a percentage price change causes a proportionally smaller change in vehicle mileage. For example, a 10% fuel price increase only reduces automobile use by about 1% in the short run and 3% over the medium run.