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Question
The bus fare between two cities is reduced. How will this affect the demand curve for bus travel between the two cities?
Solution 1
When the bus fare between two cities has been reduced, consumers get attracted to the bus service and they substitute this bus service for other services of conveyance. Therefore, the demand for the bus service increases. The price change of related goods or services here also affects the demand for a good or service. According to the law of demand, a decrease in the price of one causes a decrease in the demand for the other.
Solution 2
When the bus fare between two cities is cut, demand for bus travel rises, and the demand curve moves downward.
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