Question

Explain how each of the following events changes the demand for or supply of airline tickets....

Explain how each of the following events changes the demand for or supply of airline tickets. Roughly draw demand-supply cross diagrams to illustrate the effects on the equilibrium price of airline tickets. (No numbers are required.)

  1. The price of jet fuel rises. 2 marks.
  2. The price of a kilogram of luggage increases. 2 marks.
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Answer #1

a) is the price of Jet fuel increases this means the cost of running an airline increases as a result of which the supply of airlines decrease with which the supply curve shift to the left as a result of the equilibrium price and quantity decreases

b) price of luggage increases then it will be difficult and costly for the customers to afford travel, result of demand decreases with which the price decreases and equilibrium quantity decreases

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