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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 the Supply and Demand Diagram
Answer
To draw the supply and demand diagram, start by labeling the vertical axis as 'Price' and the horizontal axis as 'Quantity'. Begin by plotting the initial supply curve (S) and the demand curve (D) to show the existing market equilibrium where they intersect.
Step 2
Interpreting the Shift in Supply Curve
Answer
Considering the increase in jet fuel prices observed in the data from Extract B, this would generally lead to a decrease in the supply of airline tickets, as higher operational costs reduce the ability of airlines to offer the same quantity of tickets. Therefore, the supply curve will shift to the left, denoted as S1.
Step 3
Drawing the New Equilibrium
Answer
After shifting the supply curve from S to S1, identify the new equilibrium point where S1 intersects with the demand curve (D). This new point will reflect a higher price for tickets and a lower quantity supplied compared to the original equilibrium, indicating the likely effects of the change in jet fuel prices between 2014 and 2015.