Think of an auto trip to the city center as a good that people consume. Which of the following strategies is using the law of demand (as opposed to shifting the demand curve)?
A) Lowering the price of substitutes like bus and rail service, hoping to lure (persuade) commuters out of cars.
B) Raising the price of compliments by, for example, imposing high taxes on commercial parking garages.
C) Raising the price of driving into the city center. For example, London imposed a "congestion fee" increasing the cost of driving to the city center.
D) All three strategies are using the Law of Demand.
Ans) the correct option is C) Raising the price of driving into the city center. For example, London imposed a "congestion fee."
Think of an auto trip to the city center as a good that people consume. Which...
Beating the traffic All big cities have traffic problems, and many local authorities try to discourage driving in the crowded city center. If we think of an auto trip to the city center as a good that people consume, we can use the economics of demand to analyze anti-traffic policies. One common strategy is to reduce the demand for auto trips by lowering the prices of substitutes. Many metropolitan areas subsidize bus and rail service, hoping to lure commuters out...