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.

a. “Recent reductions in airfares among the major airlines has increased the demand for air travel."

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

Solutions

Expert Solution

Treating each statement independently we can tast the economic validity of the situation by applying the laws of economics.

A. ''Recent reduction in airfare among the airlines has increased the demand for air travel''

Above statement follows the law of demand that there is inverse relationship between price of a product and demand for the same. That when prices decreases demand increases and vice versa. Here same situation can be seen. Reduction in fare has decreased price of air travel so a surge in demand for airtravel has been noticed.

B. "Covid 19 pandemic has decreased demand for travel"

Theory of demand says that their are varies factors influence the demand for a product. Such as price of a product, price of other products, taste and preferences etc. Here demand for air travel is being affected by preferences of consumer. Since Covid 19 pandemic has altered consumer's preference to not to travel the demand for air travel has fallen.

Thus both the statements independently follows economic laws and theory.

Rahul Sunny answered 1 year ago

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