By using the supply and demand diagram, explain what might have happened in the airplane industry to cause air travel to increase in the last ten years.    

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mrkirschner eNotes educator| Certified Educator

The question you have deals with a basic principle in macroeconomics called the Law of Demand. Your question focuses on demand as it states that air travel has increased over the past ten years. Demand is defined as the desire to own (or use in the case of services) and the ability to purchase. Demand for airline services may be on the increase because of population increase, which would create more customers. Population growth is currently at about 80 million per year and could account for the increase.

The Law of Demand states that as demand increases, prices decrease. Price decreases also have the same impact on demand. The decrease in prices leads to an increase in demand according to the law. So the increase in demand could be related to price declines in the industry. A number of factors could cause prices to decline. A decrease in price could occur if the cost of operating airlines declined. For instance, this could occur if the cost of fuel is on the decline. It could also happen if taxes were relaxed on the airplane companies. Maybe the cost of manufacturing or maintaining the fleets went down. Competition between airlines and an influx of new companies providing airline travel could also cause the price to decrease through competition. All of these could cause a decrease in price which would encourage consumers to fly more.

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