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Using the data from Extract B, draw a supply and demand diagram for airline tickets to show the likely effects of the change in jet fuel prices between 2014 and 2015. - Edexcel - A-Level Business - Question 1 - 2017 - Paper 1
Question 1
Using the data from Extract B, draw a supply and demand diagram for airline tickets to show the likely effects of the change in jet fuel prices between 2014 and 2015... show full transcript
Worked Solution & Example Answer:Using the data from Extract B, draw a supply and demand diagram for airline tickets to show the likely effects of the change in jet fuel prices between 2014 and 2015. - Edexcel - A-Level Business - Question 1 - 2017 - Paper 1
Step 1
Constructing Supply and Demand Curves
Answer
Begin by drawing the standard supply and demand graph. On the vertical axis, label it 'Price' and on the horizontal axis, label it 'Quantity'. Draw a downward-sloping demand curve (D) and an upward-sloping supply curve (S) intersecting at equilibrium.
Step 2
Interpreting the Shift in Supply Curve
Answer
Given the increase in jet fuel prices from 2014 to 2015, the cost of providing airline tickets rises, which would likely shift the supply curve to the left. This can be represented by a new supply curve, labeled as S1, which is parallel to the original supply curve S but shifted to the left.
Step 3
Drawing the New Equilibrium
Answer
Mark the original equilibrium as E and the new equilibrium as E1 where the new supply curve S1 intersects the demand curve D. The new equilibrium will indicate a higher price and a lower quantity of airline tickets available compared to the original equilibrium.