Question

Treat each of the following statements independently, and state whether they make economic sense or not....

Treat each of the following statements independently, and state whether they make economic sense or not. Briefly explain.

a) “The Covid-19 pandemic has decreased the demand for air travel."

b) “Recent increases in airfares among the major airlines have decreased the demand for air travel."

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Answer #1

(a) The statement makes sense as COVID-19 has shifted the preferences of the people. Less and less people are travelling especially to a different city or country as the risk of catching the virus increases by travelling and coming in contact with fellow travellers. There have been several lockdowns that have also reduced the demand for air travel.

(b) The statement does not make sense as an increase in airfares (price) will lead to a decrease in the quantity demanded for air travel, but the demand for air travel is not changed. Price affects the quantity demanded and not demand. Demand is changed due to other factors like income or preferences.

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