Air Travels Rising Jet Fuel Prices
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Rising jet fuel prices recently led most major U.S. airlines to raise fares by approximately 15 percent. Explain how this substantial increase in airfares would affect the following:
1. The demand for air travel.
2. The demand for hotels.
3. The demand for rental cars.
4. The supply of overnight mail.
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Solution Summary
Discusses how substantial increase in airfares would affect demand for air travel, hotels, rental cars and overnight mail.
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1. The demand for air travel will remain the same in that the demand curve will not move. However, because the supply curve has shifted upwards (at every quantity the price is higher by 15%), the quantity demanded would have decreased.
2. The demand will shift left, at every price, people will demand fewer hotels because fewer people will be travelling. This will have the effect of decreasing ...
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