Test your understanding of economics in the news: Is this a change in supply or a change in demand?
In the January 7, 2010 Reuters article " U.S. airlines align to start new year with higher fares ," Karen Jacobs and Deepa Seetharaman report U.S. consumers can expect to pay more for air travel in 2010. Can you illustrate these changes in the market for air travel using supply and demand analysis? Do these changes include (a) an increase in the supply of air travel, (b) a decrease in the supply of air travel, (c) an increase in the demand for air travel, or (d) a decrease in the demand for air travel? Read the article below and then illustrate these changes in the market for air travel with a graph that shows the initial positions of the supply and demand for air travel and the new positions of the supply and demand curves. (Hint: Do both curves shift?) There is a link at the bottom that provides the answer. ATLANTA/NEW YORK – If you thought U.S. airlines would reduce fares following a laundry list of new security rules after an attempt to blow up a U.S.-bound plane on Chris...