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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
Draw the Supply and Demand Curves
Answer
Begin by constructing a standard supply and demand diagram. Label the vertical axis as 'Price' and the horizontal axis as 'Quantity'. Draw the demand curve (D) downward sloping from left to right, indicating that as price decreases, demand increases. Next, draw the initial supply curve (S) upward sloping from left to right, reflecting that as price increases, supply also increases.
Step 2
Shift in Supply Curve
Answer
As jet fuel prices decreased from 2014 to 2015, this directly impacts the costs for airlines. A reduction in fuel prices typically reduces operational costs, allowing airlines to supply more tickets at the same price. Therefore, shift the supply curve (S) to the right, indicating an increase in supply, resulting in a new supply curve (S1).
Step 3
Draw Equilibrium Points
Answer
Mark the original equilibrium point where the original supply curve (S) intersects the demand curve (D). Label this point as E. Then mark the new equilibrium point where the new supply curve (S1) intersects the demand curve (D), labeling it as E1. The new equilibrium will likely show a lower price level and a higher quantity of tickets supplied, indicating the impact of reduced jet fuel prices.