Turn on thread page Beta
    • Thread Starter
    Offline

    2
    ReputationRep:
    Using a diagram, explain the effect on consumer surplus of the entry of low-cost airlines into the market for air travel within the UK.

    Is my diagram correct? (I know i'll have to write something aswell to 'explain' it) We haven't done anything like this in class, i'm only using the textbook which is a bit dodgey...! Thanks.
    Attached Images
     
    Offline

    0
    ReputationRep:
    Yes. You have the right idea.

    The blue area should be called additonal consumer surplus after the entry of low cost airlines. And if I were you, I would add 2 supply curves showing the effect of increasing supply.
    Offline

    0
    ReputationRep:
    p.stick is right.

    I would strongly suggest you to add the supply curves to make things more comprehensible.
    • Thread Starter
    Offline

    2
    ReputationRep:
    But you can't show consumer surplus with supply curves can you? I thought it was producer surplus... or do you just mean 2 supply curves without showing any surplus?
    Offline

    0
    ReputationRep:
    (Original post by Shorty1992)
    But you can't show consumer surplus with supply curves can you? I thought it was producer surplus... or do you just mean 2 supply curves without showing any surplus?
    No.... I meant adding 2 supply curves, S1 and S2 to the diagram you gave. perhaps you may also want to add an arrow from S1 to S2. This conveys the message that 'increase in consumer surplus is caused by shift of supply curve.
    Offline

    15
    ReputationRep:
    I drew it out for you XD (yeah I know I should find something to do...:P)


    In figure 1 you have the original market before the entry of the new airlines.
    In figure 2 the low cost airlines have entered the market so supply increases.
    S1 shifts to S2 and there is a new market equilibrium with a lower price, consumer surplus increases, producer surplus falls as it has thus been plotted.
    • Thread Starter
    Offline

    2
    ReputationRep:
    Aww Hanoi i'm soo gonna rep you for that! Thanks!! x
 
 
 
Reply
Submit reply
Turn on thread page Beta
Updated: September 24, 2008

University open days

  • Heriot-Watt University
    School of Textiles and Design Undergraduate
    Fri, 16 Nov '18
  • University of Roehampton
    All departments Undergraduate
    Sat, 17 Nov '18
  • Edge Hill University
    Faculty of Health and Social Care Undergraduate
    Sat, 17 Nov '18
Poll
Have you ever experienced bullying?

The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

Write a reply...
Reply
Hide
Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.