Question

Bring out the factor that may change the supply and demand conditions and thereby the equilibrium price for airlines tickets. Use graph for elaboration.

*please no handwriting only computer writing

*please answer from your own words not cheeg answers

* please add (graphs)

Answer 1

Ans Demand side factors :

1) Own price of airline tickets: If the airline tickets are costly, then there will be less demand for airline tickets. The change in own price of airline tickets causes a movement along the demand curve.

2. Price of Substitute airlines: If there are other substitute airlines / or other modes of transportation are available and they are offering travelling at less price, then demand for air travel falls. The demand curve shifts leftward and price and quantity falls.

3. Change in the preference, quality about air travel: If there is a favourable change in taste and preference or about the quality of air travel, then demand curve for air travel shifts rightward. The equilibrium prices rises and quantity also rises.

The following diagram shows the shift in demand curve :

Supply Side Factors:

1. Own price of air travel: If the price of air travel falls, then airline company prefers to supply less of airline travels because of law of supply. This causes a movement along the supply curve.

2. Change in the cost of airline travel: If the cost of airline travelling rises, it causes a reduction in the supply of airline travelling. The supply curve shifts leftward and price increases and quantity falls.

3. Change in tax rate: If the tax rate on oil used by airlines falls, then it will supply more of airline travelling to its customer. The supply curve shifts rightward. The price falls and quantity rises.

The following diagram shows the shift in supply curve :