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Homework answers / question archive / According to an article in the Wall Street Journal, between 1998 and 2018, the number of non stop coast-to-coast flights in the United States more than doubled at the same time that the price of a ticket declined
According to an article in the Wall Street Journal, between 1998 and 2018, the number of non stop coast-to-coast flights in the United States more than doubled at the same time that the price of a ticket declined. Source: Scott McCartney, "The Rare Case Where Airlines and Passengers Both Win," Wall Street Journal, March 28, 2018. Briefly explain whether the scenario can account for this outcome. The demand for coast-to-coast flights and the supply of flights both increased during this period. This scenario A. can account for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing if the increase in supply is small enough relative to the increase in demand. B. can't account for the outcome of the quantity of coast-to-coast flights increasing at the same time that the price was decreasing because the price will always be higher in this scenario. C. can account for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing if the increase in supply is large enough relative to the increase in demand. D. accounts for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing, irrespective of the relative size of the shifts of supply and demand. The demand for coast-to-coast flights and the supply of flights both decreased during this period. This scenario A. can account for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing if the decrease in demand is large enough relative to the decrease in supply. B. can't account for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing because a decrease in demand and a decrease in supply will both push the price higher. C. can't account for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing because a decrease in demand and a decrease in supply will both push the quantity lower. OD. accounts for the quantity of coast-to-coast flights increasing at the same time that the price was decreasing, irrespective of the relative size of the shifts of supply and demand.
1. C
Increase in demand shifts demand curve rightward, increasing price and increasing quantity. Increase in supply shifts supply curve rightward, decreasing price and increasing quantity. Net effect is a definite increase in quantity. But price has an uncertain effect. If rightward shift in supply is higher in magnitude compared to rightward shift in demand, price will decrease as net effect.
2. C
Decrease in demand shifts demand curve leftward, decreasing price and decreasing quantity. Decrease in supply shifts supply curve leftward, increasing price and decreasing quantity. Net effect is a definite decrease in quantity. But price has an uncertain effect. If leftward shift in supply is lower in magnitude compared to leftward shift in demand, price will decrease as net effect.
