Suppose the state government establishes a program to subsidize public transportation for commuters, such that each train trip now costs Alex $6. c. Determine which line (L1, L2, L*, or L**) represents Alex's new budget constraint. d. Find their new utility-maximizing bundle (E1, E2, e*, or e**). Determine how many train trips Alex will now take. e. Find the size and direction (positive or negative) of the substitution effect for train trips. As part of your answer, state the starting quantity and ending quantity of train trips that represent this effect. f. Find the size and direction (positive or negative) of the income effect for train trips. As part of your answer, state the starting quantity and ending quantity of train trips that represent this effect. g. Is train travel a normal or inferior good for Alex?

Suppose the state government establishes a program to subsidize public transportation for commuters, such that each train trip now costs Alex $6. c. Determine which line (L1, L2, L*, or L**) represents Alex's new budget constraint. d. Find their new utility-maximizing bundle (E1, E2, e*, or e**). Determine how many train trips Alex will now take. e. Find the size and direction (positive or negative) of the substitution effect for train trips. As part of your answer, state the starting quantity and ending quantity of train trips that represent this effect. f. Find the size and direction (positive or negative) of the income effect for train trips. As part of your answer, state the starting quantity and ending quantity of train trips that represent this effect. g. Is train travel a normal or inferior good for Alex?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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