Economics 9708 · AS & A Level · Income elasticity of demand

Income elasticity of demand — practice question

In a rural area, the fare for a bus journey is $5. To improve local transport, the government provides bus firms with a subsidy of $2 per journey. The diagram shows the possible changes in demand and supply. What is the new quantity of journeys and the bus fare for a journey?

  • Aquantity of journeys 950; bus fare $3
  • Bquantity of journeys 950; bus fare $7
  • Cquantity of journeys 1050; bus fare $4
  • Dquantity of journeys 1050; bus fare $6

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