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# Income and substitution effect question watch

1. We got two types of goods, train travel and air travel. Given that train travel is inferior good.
So what is the substitution and income effect of a government subsidy on train travel? How will the quantity demanded of two goods change?

As far as I am concerned, the substitution effect will reduces air travel and increases train travel. The in come effect will however increases air travel and decreases train travel. Is that right? If so what is the final change in each form of the travel? Really confused.

Thx guys for help
2. (Original post by Caberus)
We got two types of goods, train travel and air travel. Given that train travel is inferior good.
So what is the substitution and income effect of a government subsidy on train travel? How will the quantity demanded of two goods change?

As far as I am concerned, the substitution effect will reduces air travel and increases train travel. The in come effect will however increases air travel and decreases train travel. Is that right? If so what is the final change in each form of the travel? Really confused.

Thx guys for help
I think you'd be better off asking this in the economics forum.
3. It's double posted on there.

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Updated: April 5, 2013
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