In Atlanta, the price elasticity of demand for bus rides is -0.5, the income elasticity of demand for bus rides is -0.1 and the cross price elasticity of demand for bus rides with respect to gasoline is 0.2.
Is the demand for bus rides elastic or inelastic with respect to the price of a bus ride? Why?
Would an increase in bus fares increase the bus company’s total revenues? Explain your answer.
Describe the relationship between bus rides and gasoline. Explain
If the price of gasoline increases by 10% with no change in the price of a bus ride, how will the number of bus rides change?
If incomes in Atlanta increase by 5% with no change in the price of a bus ride, how will the number of bus rides change? Is a bus ride a normal or inferior good? Why?