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1.3 Price determination in a competitive market

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Question 9

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?

+3.0%+3.0\%+3.0%

+15.0%+15.0\%+15.0%

−3.0%-3.0\%−3.0%

−1.5%-1.5\%−1.5%

1.3 Price determination in a competitive market Questions

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