Question

AirAsia X (AirAsia’s long-haul, low-cost international carrier) defers delivery of 78
Airbus SE A330neo planes. Show the effect of this cancellation on Airbus planes’
demand.
Use a supply and demand diagram to illustrate the effect of the given shock on the equilibrium price and quantity in the specified competitive market.
Explain whether there is a shift in the demand curve, the supply curve, or neither.
Use Airbus planes' demand not Air asia's demand for passenger.Please make research based on news .Give long explanation.

Answer 1

Airbus is a seller and AirAsia is a consumer. When AirAsia does not buy 78 planes then supplyis more.

Supply hjas already shifted right and if there is no demand for the same from other markts then Airbus may decide to lower prices and clear the stock and meet AirAsia demand later by making additional planes.

However, Airbus policy depends on elasticty of supply and elasticty of demand.

It is clear that supply shifted from S1 to S2 and price will come down from p1 to p2. However it depends on elastictities of demand and supply. If demand is elastic then Airbus will bear the burden if it is inelastic then customers will. If supply is elastic then Airbus may hold for sometime.