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1.3 Price determination in a competitive market

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Question 4

A transport authority estimates the following elasticity values for suburban commuter rail travel:

  • Price elasticity of demand (PED\text{PED}PED) = -0.5
  • Cross-price elasticity of demand with respect to urban bus fares (XED\text{XED}XED) = +0.6
  • Income elasticity of demand (YED\text{YED}YED) = +1.5

If urban bus fares increase by 15% and average consumer incomes rise by 4%, whilst the fare for suburban commuter rail travel remains unchanged, what is the expected percentage change in the quantity demanded for suburban commuter rail travel?

A

+3.0%+3.0\%+3.0%

B

+15.0%+15.0\%+15.0%

C

−3.0%-3.0\%−3.0%

D

−1.5%-1.5\%−1.5%

Markscheme

1.3 Price determination in a competitive market Questions

  1. A Level
  2. /Economics
  3. /1.3 Price determination in a competitive market

256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.

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