Suppose the income elasticity for cross-country bus trips is –2 and the income e

Question

Suppose the income elasticity for cross-country bus trips is –2 and the income elasticity for cross-country plane trips is +2. Does this make sense? Explain your answer
Suppose the income elasticity for cross-country bus trips is –2 and the income elasticity for cross-country plane trips is +2. Does this make sense? Explain your answer
Suppose the income elasticity for cross-country bus trips is –2 and the income elasticity for cross-country plane trips is +2. Does this make sense? Explain your answer

Explanation / Answer

Yes, it does make sense. It implies that air travel is a normal good and train travel is an inferior good. Thus, if the income of individual decreases, he will not be able to use the plane and thus the demand for it will fall and he will use a train and thus the demand for train rises. So, this absolutely makes sense as it should be.

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