Chapter 4, Problem 1SPPA

To determine

To explain:

The way airfare tumble can change the demand and supply for travelling by air if the bus fares are constant.

Explanation of Solution

Airfares tumble, while there is no change in fares of long-distance buses fares will increase the demand for airline travel over bus travel because the airfares are lower compared to its substitute mode of travel which are buses.

Economics Concept Introduction

Demand and supply:

Demand refers to the willingness and ability for a consumer to purchase the commodities or services at a given price within a given period of time, whilst supply is the willingness and ability of a producer to sell the commodities or services at a particular price within a particular period of time.

To determine

To explain:

The way increase in price of jet fuel can change the demand and supply for travelling by air.

Explanation of Solution

The increase in price of jet fuel would increase the cost of production affecting the supply of airlines. This supply for air travel will fall.

Economics Concept Introduction

Demand and supply:

Demand refers to the willingness and ability for a consumer to purchase the commodities or services at a given price within a given period of time, whilst supply is the willingness and ability of a producer to sell the commodities or services at a particular price within a particular period of time.

To determine

To explain:

The way reduction in number of daily fights by airline can change the demand and supply for travelling by air.

Explanation of Solution

Airlines reducing the number of flights each day signifies a fall in supply for air travel against the high demand.

Economics Concept Introduction

Demand and supply:

Demand refers to the willingness and ability for a consumer to purchase the commodities or services at a given price within a given period of time, whilst supply is the willingness and ability of a producer to sell the commodities or services at a particular price within a particular period of time.

To determine

To explain:

The way expectations of people for an increase in airfare next summer can change the demand and supply for travelling by air.

Explanation of Solution

If people expect airfare to increase next summer then they will use air travel more now before the process drives up, which will thereby increase demand.

Economics Concept Introduction

Demand and supply:

Demand refers to the willingness and ability for a consumer to purchase the commodities or services at a given price within a given period of time, whilst supply is the willingness and ability of a producer to sell the commodities or services at a particular price within a particular period of time.

To determine

To explain:

The way if fall in price of train can change the demand and supply for travelling by air.

Explanation of Solution

Trains are a substitute to airlines, therefore when the price of train travel falls it will reduce the demand for air travel because people will prefer to travel through trains rather than airlines.

Economics Concept Introduction

Demand and supply:

Demand refers to the willingness and ability for a consumer to purchase the commodities or services at a given price within a given period of time, whilst supply is the willingness and ability of a producer to sell the commodities or services at a particular price within a particular period of time.

To determine

To explain:

The way increase in price of a pound of air cargo can change the demand and supply for travelling by air.

Explanation of Solution

The increase in price of a pound of air cargo will decrease the demand because people will have to pay more to bring more luggage, therefore reducing the demand.

Economics Concept Introduction

Demand and supply:

Demand refers to the willingness and ability for a consumer to purchase the commodities or services at a given price within a given period of time, whilst supply is the willingness and ability of a producer to sell the commodities or services at a particular price within a particular period of time.