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In a study published in 1980, B. B. Gibson estimated the following price and income elasticities of demand for six types of public goods:

State Activity Price Income
Elasticity Elasticity
Aid to needy people -0.83 0.26
Pollution control -0.99 0.77
Colleges and universities -0.87 0.92
Elementary school aid -1.16 1.14
Parks and recreational areas -1.02 1.06
Highway construction and -1.09 0.99
maintenance

(a) Do these public goods conform to the law of demand? For which public goods is demand price elastic?

(b) What types of goods are these public goods?

(c) If the price or cost of college and university education increased by 10 percent and, at the same time, incomes also increased by 10 percent, what would be the change in the demand for college and university education?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M946690

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