In a metropolitan transit system, when average household incomes rise by 8%, the quantity of bus journeys demanded falls by 4%. In the same period, a 5% increase in the price of underground train tickets leads to a 3% increase in the quantity of bus journeys demanded.
Which of the following shows the correct estimates of the income elasticity of demand (YED\text{YED}YED) and cross-price elasticity of demand (XED\text{XED}XED), along with their correct classifications, for bus journeys?
YED=−0.5\text{YED} = -0.5YED=−0.5 (inferior good) and XED=+0.6\text{XED} = +0.6XED=+0.6 (substitutes)
YED=−2.0\text{YED} = -2.0YED=−2.0 (inferior good) and XED=+1.67\text{XED} = +1.67XED=+1.67 (substitutes)
YED=+0.5\text{YED} = +0.5YED=+0.5 (normal good) and XED=−0.6\text{XED} = -0.6XED=−0.6 (complements)
YED=−0.5\text{YED} = -0.5YED=−0.5 (normal good) and XED=+0.6\text{XED} = +0.6XED=+0.6 (complements)
