A3.4 The monthly demand for bus rides in Miami, Florida, depends on the price of a train ride, the price of a bus ride, and the average monthly income of riders.

Some consumers might choose to ride the train instead of the bus, while other riders might use both forms of transportation to get to their final destination. The demand function for bus rides is Qd = 12,750 - 500P + 250Pj + 0.05INCOME where Qd is the number of bus rides demanded per month, P is the price of a bus ride, Pj is the price of a train ride, and INCOME is the average monthly income of riders.

a. Suppose that P = $1.50, Pj = $1.00, and INCOME = $5,000. What is the monthly quantity of bus rides demanded?

b. Suppose that P = $1.50, Pj = $4.00, and INCOME = $3,000. What is the value of the cross-price elasticity of demand? Based on your answer, are train rides and bus rides substitutes or complements?

c. Suppose that P = $1.50, Pj = $4.00, and INCOME = $3,000. What is the value of the income elasticity of demand? Based on your answer, are train rides an inferior or a normal good?