Flights to Paris are a normal good and people's 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

When people's incomes rise, demand for normal goods like flights to Paris increases, which tends to push the price and quantity up. However, if the price of jet fuel rises, the cost of providing flights increases, leading to a decrease in supply, which tends to increase price but decrease quantity. The overall effect on quantity is uncertain without more information about the relative magnitudes of the shifts in demand and supply, hence the equilibrium price of a flight to Paris rises, but the equilibrium quantity might increase, decrease, or not change.

Flights to Paris Are a Normal Good and People's Incomes