Assume that both air travel and travel by car are normal goods and you spend a fixed amount of income on both goods.Suppose that when the price of crude oil goes up by 30%,the price per mile of air travel goes up by 10% and the price per mile traveled by car goes up by 20%.Explain how the increase in the price of crude oil affects air travel and travel by car in terms of the income effect,the substitution effect,and the overall (net)effect.
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