Cross-Price Elasticity and Substitutes
The cross-price elasticity of demand for public transportation with respect to the price of gasoline is +0.3. If the price of gasoline decreases, which of the following is the most likely outcome?
A
Transit use will be unaffected by changes in gas prices
B
Transit use will increase proportionally to gas price drops
C
Falling gas prices will moderately decrease transit use
D
Falling gas prices will significantly increase transit use
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