1.4 In the market for air travel, which of the following variables would decrease demand, ceteris paribus?
a) An increase in rental rates for hired cars, a substitute.
b) A rise in income for tourists.
c) A rise in the price of air travel.
d) A rise in the price of hotel accommodation, a complement.
(a) An increase in rental rates for hired cars which is a substitute would make air travel relatively cheaper than before and so air travel demand will increase.
(b) A rise in income for tourists will increase the demand for air travel as tourists purchasing power has increased.
(c) A rise in the price of air travel will decrease the quantity demanded of air travel but this is not the same as decrease in demand for air travel.
(d) A rise in the price of hotel accommodation which is a complement will decrease the demand for air travel.
Hence the correct answer is option (d)
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