A market research study in a city finds that when the average annual household income increases from £30,000 \pounds 30,000\,£30,000 to £33,000\pounds 33,000£33,000, the weekly quantity demanded of local public bus journeys falls from 12,000 12,000\,12,000 to 10,20010,20010,200. Over the same period, the weekly quantity demanded of premium taxi rides increases by 15%.
Based on this information, which one of the following is correct?
Public bus journeys are a normal good with an income elasticity of demand (YEDYEDYED) of −1.5-1.5−1.5.
Premium taxi rides are an inferior good with an income elasticity of demand (YEDYEDYED) of +1.5+1.5+1.5.
Public bus journeys are an inferior good with an income elasticity of demand (YEDYEDYED) of −1.5-1.5−1.5.
Premium taxi rides are a necessity with an income elasticity of demand (YEDYEDYED) of +0.67+0.67+0.67.
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.