Question

After a recent study showed significant benefits to the use of public transportation, government officials have hired your consulting firm to increase the use of public transportation. In the initial meeting between the government officials and your consulting firm, some ideas for increasing demand were discussed. Three of those suggestions are listed below.Suggestion 1. Reduce the price of public transportationSuggestion 2. Increase the price of private transportation by increasing tollsSuggestion 3. Offer monthly and yearly passes that reduce the price paid per rideBased on your knowledge of the law of demand, which suggestions would you recommend?a. 1b. 2c. 3d. 1 and 3

Answer 1

Answer:

b. Suggestion 2

Explanation:

Suggestion 2 will increase the demand for public transportation because private transportation is a substitute. If it is expensier to use private transportation, some people that before used private transportation will start using the public one. Suggestion 1 and 3 will not increase demand (shift the demand curve in the demand and supply graph), they will result in changes in the quantity demanded (movements along the demand curve).