11. Many proponents of public transit argue that the service should be provided free to the...

11. Many proponents of public transit argue that the service should be provided free to the public in metropolitan areas in order to reduce pollution and traffic congestion. Estimates by economists found the price elasticity of demand for public transit to be 0.17. The economists also found the cross-price elasticity of demand with the automobile to be 0.10.

a. What will free public transit mean to the use of the public transportation service?

b. What will free public transit mean to the use of the automobile?

12. What would happen to the demand curve in each of the following cases:

a. income rises

b. the number of customers rises

c. the number of substitutes increases

d. people expect that the price of the good will decline in the near future

e. people expect that the price of the good will rise in the future

13. For each of the following pairs of goods or services, identify the one for which the price elasticity of demand is greater and explain why.

• Coffee/Starbucks coffee

• Tuition at a public university/tuition at a private university

• Emergency room medical service/annual physical exam

• Movies in the afternoon/movies at night

• Prescription medicine/over-the-counter medicine

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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