Flights to Paris are a normal good and peopleʹs incomes rise. At the same time, the price of jet fuel rises. The equilibrium price of a flight to Paris __________and the equilibrium quantity of flights to Paris __________.

Question

Quizplus · Accepted Answer

The increase in people's incomes would lead to an increase in the demand for flights to Paris, which would push the equilibrium price up. However, the increase in the price of jet fuel would increase the cost of production for airlines, which would push the equilibrium price down. The equilibrium quantity of flights to Paris might increase, decrease or not change depending on the strength of the competing forces of income and fuel price changes. Therefore, the best answer is D, as it accounts for the possibility of either an increase, decrease or no change in the equilibrium price and quantity.

Flights to Paris Are a Normal Good and Peopleʹs Incomes