For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

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Astro

Business

15 May, 00:49

For people who live near a bus route, a subway station, or a commuter rail line, public transportation provides a substitute to driving their own cars. So, for these people, the cross-price elasticity of demand between gasoline and public transportation is

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Lincoln Schultz · Answer 1

Elastic

Explanation:

Demand cross elasticity measures the percentage change in the quantity demanded of a good given a percentage change in the price of another substitute good. For example, how much would be the increase in the amount of public transport demanded if there was an increase in the price of automotive gasoline. Because they are substitute goods, it is expected that the increase in the price of a product will lead to increased demand from its competitor. This means that the cross elasticity of demand between gasoline and public transport is elastic, ie price sensitive.