ECONOMIC PERSPECTIVES

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...

In the January 6, 2010 article " Cold grips much of US, Fla. races to save crops ," Associated Press writer Melissa Nelson reports that freezing temperatures in Florida might destroy "millions of dollars' worth of strawberries and other crops." Using the ceteris paribus assumption that ignores other potential changes, what is the likely effect on the market for strawberries if the freeze destroys the ones grown in Florida. Is this change in the strawberry market (a) an increase in the supply of strawberries, (b) a decrease in the supply of strawberries, (c) an increase in the demand for strawberries, or (d) a decrease in the demand for strawberries? Will the equilibrium price of strawberries increase or decrease as a result of the damage from cold temperatures? Read the article below and then illustrate this price change with a graph that shows the initial positions of the supply and demand for strawberries and the new positions of the supply and demand curve...

Click on the image above to enlarge it. In the January 6, 2010 Wall Street Journal article " Cramped on Land, Big Oil Bets at Sea ," Ben Casselman and Guy Chazan report that oil companies exploring in deep ocean waters have discovered "unexpectedly large quantities of oil -- oil that only they have the technology and financial muscle to find and produce." Using the ceteris paribus assumption that ignores other potential changes, what is the likely effect of this discovery on the market for oil? Is this change in the oil market (a) an increase in the supply of oil, (b) a decrease in the supply of oil, (c) an increase in the demand for oil, or (d) a decrease in the demand for oil? Will the equilibrium price of oil increase or decrease as a result of these newly found oil reserves? Read the article below and then illustrate this price change with a graph that shows the initial positions of the supply and demand for oil and the new positions of the supply and dema...

In the January 1, 2010 New York Times article " Next Up on Cable TV, Higher Bill for Consumers ," Brian Stelter reports that cable TV companies are paying higher fees for the programs they broadcast. Using the ceteris paribus assumption that ignores other potential changes, what is the likely effect on the market for cable TV if increasing numbers of networks demand higher fees from the cable companies in order to broadcast their programs? Is this (a) an increase in the supply of cable TV, (b) a decrease in the supply of cable TV, (c) an increase in the demand for cable TV, or (d) a decrease in the demand for cable TV? Will the equilibrium price of cable TV increase or decrease as a result of cable TV companies paying higher fees for the programs they broadcast ? Read the article below and then illustrate this price change with a graph that shows the initial positions of the supply and demand for cable TV and the new positions of the supply and demand curves. (Hint: Does ...