There is an increase in both consumer income and in the price of jet fuel, an important resource used to produce air travel. If air travel is a normal good, how will these changes influence the price and quantity purchased of air travel?

Question

Quizplus · Accepted Answer

An increase in consumer income would lead to more demand for air travel, which would increase the price of air travel due to the limited availability of jet fuel. The price of jet fuel is a variable cost for airlines, meaning that as its price increases, the price of air travel will also increase. However, it is uncertain how much the quantity of air travel purchased will be affected, as it also depends on factors such as consumer preferences and the availability of substitutes. Therefore, the price will increase and the quantity purchased will be indeterminate.

There Is an Increase in Both Consumer Income and in the Price