A transport economics department finds that when municipal authorities increase the price of electric scooters by 10%, the quantity demanded of public transit passes increases by 15%, while the quantity demanded of helmets decreases by 8%.
The above statement suggests that:
a 10%10\%10% decrease in the price of electric scooters would lead to a 15%15\%15% increase in the quantity of public transit passes demanded.
the cross elasticity of demand between electric scooters and public transit passes is +0.67+0.67+0.67, indicating they are weak substitutes.
the cross elasticity of demand is positive between electric scooters and public transit passes, and negative between electric scooters and helmets.
the income elasticity of demand for public transit passes is positive, classifying them as a normal good.
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.