Cross-Price Elasticity of Demand Steps:

• Recognize bus and rail as substitute transport modes, yielding positive cross-price elasticity (E_cross > 0).
• Apply formula: % change in rail volume = E_cross × % change in bus fares.
• Use E_cross = 0.16 (from demand data) and 1% bus fare increase.
• Calculate: 0.16 × 1% = 0.16% increase in rail volume.

Why C is correct:

• It directly results from the cross-price elasticity formula, where substitutes cause rail demand to rise with bus price hikes.

Why the others are wrong:

• A and B: Incorrect direction; substitutes predict an increase, not decrease.
• D: Wrong magnitude; elasticity yields 0.16%, not 0.43%.

Final answer: C