Question

1. On Friday March 10th 2017, around 11pm your instructor Mr. Tamba Yaradouno was at O'Hare International Airport in Chicago picking up a relative. At the passengers arrival what they call "Vestibule" or numbered gates, he could not park and waited for long. The area was packed, airport security cars flashing lights everywhere not allowing anyone to park but just enough time to pick up people.

On Friday October 12th 2018 at about same time your instructor was at the same spot of that airport to surprisingly notice that the area was completely empty and sat there for almost two hours.

Explain in your words in two pages including graphs (hand written or typed, Microsoft office word, times new roman, 12 fonds, double spaced):

a. What has happened to the demand curve of tourists visiting Chicago and the USA in general.

b. What could happened to both demand and supply curves of airport jobs, to the international flights into the USA if this trend of tourists decline continue.

Note: Do not include COVID- 19 here, this is the change of the world view of the USA from the Obama administration compared to President Trump and thus the changes of the number of tourists visiting USA

Answer 1

a) the demand curve of tourists visiting USA has shifted to the left. It implies that number of tourists now visiting USA has decrease which is also indicated by the fact that area was empty. This phenomenon is plotted on the graph mentioned below. Earlier more people used to visit USA, hence demand curve was D1. But now the demand curve has fallen to D2.

b) demand and supply of airport jobs

Since less number of tourists are now visiting USA, this means the airport no longer needs the services of as many personnel as it needed beofore when the influx of tourists was high. So, the demand of airport jobs would also fall. Since there is nothing else that changes (example the salary of those personnels) we can conclude that the supply would not change. The graph is given below. The same explanation as mentioned in part a) applies here

Now let us talk about demand and supply of international flights in USA

since less passengers are travelling in the flights, this would mean that the demand of international flights would reduce. Also, the companies owing the planes would reduce the number of flights that take off everyday because there is no point incuring the fixed cost of fuel and airplane crew only to ferry few passengers to USA. Frequency of flights would reduce, thereby shifting the supply curve leftwards. But the diagram in this case is not straigh forward as was mentioned in the earlier cases. The quantity of international flights would definitely fall but the price may vary depending on the relative shifts in supply and demand curves.

case 1: When the shift in supply curve is less than the shift in demand curve, this would mean that price goes down.

case 2: When the shift in supply curve is equal to the shift in demand curve, this would mean that price remains same.

case 1: When the shift in supply curve is more than the shift in demand curve, this would mean that price goes up.