23 July 2008

Cross-price elasticity of demand examples

Harvard economics professor Greg Mankiw on his weblog has been running a series of examples of how people respond to prices. Most relate to transport behaviour switches in response to the higher price of oil:

XIII NEW - switching from private jets to commercial airlines
XII NEW - switching to more fuel-efficient aircraft
XI - switching to golf carts on the street
X - switching to the train
IX - switching to small used cars
VIII - switching to on-line education
VII - switching to scooters
VI - switching to a home closer to a rail station
V - switching to mules
IV - switching to bicycles
III - switching to mass transit
II - switching to camels
I - switching to smaller cars

I have noticed the car park at my local rail station completely fill up since petrol prices started rising. Tranz Metro is responding to this by planning to increase rail fares from 1 September 2008 and ordering new trains.

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