Managerial Economics 2nd Edition by William Boyes

Exercise 1

Many proponents of public transit argue that the service should be provided free to the public in metropolitan areas in order to reduce pollution and traffic congestion. Estimates by economists found the price elasticity of demand for public transit to be 0.17. The economists also found the cross-price elasticity of demand with the automobile to be 0.10.
a. What will free public transit mean to the use of the public transportation service?
b. What will free public transit mean to the use of the automobile?