Cross-price elasticity for substitutes

Steps:

• Identify cross-price elasticity formula: % change in quantity of good X (car use) divided by % change in price of good Y (bus fare).
• Note % change in car use = -1% (reduction).
• Note % change in bus fare = -50% (fall).
• Calculate: (-1%) / (-50%) = +0.02.

Why C is correct:

• +0.02 matches the formula for cross-price elasticity, positive for substitute goods where lower bus price reduces car use.

Why the others are wrong:

• A: -0.60 ignores sign flip from negative changes, and miscalculates magnitude.
• B: -0.02 uses wrong sign for substitutes.
• D: +0.60 reverses numerator and denominator percentages.

Final answer: C