Suggested Answers of BT2 Revision Package - ASKnLearn

Possible non-price determinants of increased demandA rise in income due to economic boom as mentioned in the preamble that the GDPincreased 11.2%. Singaporeans have higher disposable income. The consumers will havehigher purchasing power and higher ability to spend. This causes an increase in demandfor normal goods such as taxis, causing a rightward shift of demand curve.As stated in the preamble, COE prices of cars have seen a sharp increase in 2011. Theimplication is that the prices of the cars have increased and have become relatively moreexpensive. When price of cars increase, this will lead to a fall in quantity demanded forcars. Consumers, given a stronger economy, switch to taking taxis as a substitute for carsand public transportation such as buses and MRT. There will be an increase in demand fortaxis, causing the demand curve to shift right even further.Synthesis (Diagram)Price of taxi (taxi fares)S20S1P2P1D2D10Figure 1: Market for taxisQuantity of taxis