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 would tend to increase both the equilibrium price and quantity. However, if the price of jet fuel rises, the cost of providing flights increases, leading to a decrease in supply. This would tend to increase the price but decrease the quantity of flights. The overall effect on quantity is uncertain without knowing 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