This Question 1 pt 15 of 45 14 complete This lest 45 pls pos

This Question: 1 pt 15 of 45 (14 complete) This lest. 45 pls possole Suppose there is an increase in demand for public transportation because of an increase in the price of automobiles Which of the following is a possible reason for this elastc demand for automobiles? Cheok al hat A. A large share of a consumer\'s budget is spent on automobiles B. There is a close availability of substitutes for automobiles C. There is a reduction in the price of public transportation D. There is more available time to adjust to the price change. An increase in a fuel tax would cause Y in demand for automobiles, and the cross-price elasticity would be an increase no significant change a decrease Click to select your answer(s). average taxes and higher marginal taxes. tax system: the rich earn a high share of the national income but pay even a higher share of total taxes. For example, the richest

Solution

1. ans: B) There is a close availability of substitutes for the automobiles.

There is close substitutes available for the automobiles so when there is a rise in the price of automobiles it caused an increase in the demand for the second and that is the public transportation. They are substitute goods.

2. An increase in the fuel tax would cause a decrease in the demand for automobiles, and the cross price price elasticity would be negative. The fuel and the automobiles are complementary goods so as the price of one good rises the demand for the second commodity decreases. The complementary goods have a negative cross price elasticity.