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The Express Rail Link (XRL) project (Hong Kong Section) is expected to be completed in 2018. it will shorten the estimated journey time between Hong Kong and various Mainland cities. Below are some opinions on the XRL project.
Government officials: "With better infrastructure, the overall economic development of Hong Kong will be enhanced."
Small medium enterprise owners: "We expect that the XRL could bring more Mainland travelers to Hong Kong."
Suppose the Hong Kong economy operates at E1. with reference to the above opinions, show why the price level of Hong Kong may rise in the long run after the completion of XRL project in Figure 1. (3 marks)
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