ECONOMICS
MARKETS AND PRICES
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
a 10% increase in fares will lead to a 15% decrease in passengers
|
|
|
bus travel is an inferior good
|
|
|
bus travel has a negative cross elasticity of demand
|
|
|
as unemployment falls, more people will use buses
|
Detailed explanation-1: -What Does an Income Elasticity of Demand of 1.50 Mean? Since the value is positive, the good is elastic. It implies that for every 1% increase in income, people will demand 1.5x the number of goods.
Detailed explanation-2: -Examples of different types of good Inferior good – Supermarket own brand coffee, bus travel, a day out at theme park.
Detailed explanation-3: -Income elasticity of demand is the change in the quantity demanded of a commodity with respect to the percentage change in the income. The demand for inferior goods rises when the real income of consumers falls and vice versa. Hence, income elasticity of demand for inferior goods is negative.
Detailed explanation-4: -For example, if a person experiences a 20% increase in income, the quantity demanded for a good increased by 20%, then the income elasticity of demand would be 20%/20% = 1. This would make it a normal good.