Consider the market for bus travel, where equilibrium price and quantity is determined by demand and supply. If bus travel is an inferior good and there is an increase in income and at the same time, the government subsidises bus travel, which of the following will occur? (a) The equilibrium price and quantity will be lower. (b) The equilibrium quantity will be higher, but the impact on price will be unknown. (c) The equilibrium price will be lower, but the equilibrium quantity will be higher. (d) The equilibrium price will be lower, but the impact on quantity will be unknown.
Consider the market for bus travel, where equilibrium price and quantity is determined by demand and supply. If bus travel is an inferior good and there is an increase in income and at the same time, the government subsidises bus travel, which of the following will occur? (a) The equilibrium price and quantity will be lower. (b) The equilibrium quantity will be higher, but the impact on price will be unknown. (c) The equilibrium price will be lower, but the equilibrium quantity will be higher. (d) The equilibrium price will be lower, but the impact on quantity will be unknown.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter8: Understanding Markets And Industry Changes
Section: Chapter Questions
Problem 8.1IP
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Consider the market for bus travel, where
(a) The equilibrium price and quantity will be lower.
(b) The
(c) The equilibrium price will be lower, but the equilibrium quantity will be higher.
(d) The equilibrium price will be lower, but the impact on quantity will be unknown.
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