a. Sketch a graph of a preference map and a budget line to illustrate the best affordable combination of gasoline and public transit.
b. On your graph show the effect of a rise in the price of gasoline on the quantities of gasoline and public transit services purchased.
With the price of gas approaching $4 a gallon, more commuters are abandoning their cars and taking the train or bus. It’s very clear that a significant portion of the increase in transit use is directly caused by people who are looking for alternatives to paying $3.50 a gallon for gas. Some cities with long-established public transit systems, like New York and Boston, have seen increases in ridership of 5 percent, but the biggest surges—of 10 to 15 percent over last year—occurring in many metropolitan areas in the Southwest where the driving culture is strongest and bus and rail lines are more limited.