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More people travel by airplane today than 10 years ago. Using supply and demand...

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user3120320 | Salutatorian

Posted October 3, 2013 at 3:43 PM via web

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More people travel by airplane today than 10 years ago. Using supply and demand analysis, explain what might have happened in the market for travel to cause this increase.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted October 3, 2013 at 4:04 PM (Answer #1)

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In order for the amount of air travel to rise, supply must rise, demand must rise, or both.  It is most likely that the increase in air travel over the last 10 years has been caused more by an increase in demand than an increase in supply.

Supply increases if the cost of providing a good or service decreases.  This is not generally the case with air travel as fuel prices have risen over the last 10 years.  Therefore, demand is more likely to be driving the increase in air travel.

One of the major causes of an increase in demand is an increase in consumer incomes.  When consumers have higher incomes, they have more money to use to buy things.  When consumers have more money, the demand for most things rises.  This is probably the main factor behind the increase in air travel over the last 10 years.  Assuming that we are talking about air travel worldwide, there are many more people who can afford air travel now than there were 10 years ago.  The rise of incomes in places like China and India has meant that there are more potential customers today.

Thus, the rise in air travel probably comes more from an increase in demand than an increase in supply. 

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