Draw a demand and supply diagram to show how the market for air travel within the UK has been affected by the entry and low-cost airlines [4 marks]
So, would the demand curve shift to the right and the supply stay the same?
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Demand and supply diagram watch
- Thread Starter
- 24-09-2008 14:07
- 24-09-2008 14:09
no, supply shifts to the right. Demand stays the same.
- 24-09-2008 14:13
Supply to the right to show an increase in quantity and a drop in price.
- 24-09-2008 14:36
The supply will shift, but the demand will not shift.
The law of demand (downward-sloping demand curve) dictates that 'when price decreases, quantity demanded increases, vice versa, other things being equal'. In this case, nothing other than price makes people to take more flights - you won't 'be more likely to go on holiday' when you see there are more low cost airlines. You want to go on holiday more because you see the ticket price goes down, which is a result of increased competition, which is in turn the result of entry of low cost airlines.
In other words, the downward sloping demand curve itself already explains the change in quantity demanded caused by change in price. Shifts of demand curve is caused by changes in parameters, i.e. factors other than price, such as rising price of oil, greater speed of international ferry service, etc.