Prices of commercial airline tickets have fallen in recent months.Over this same period, the price of jet fuel has risen and consumer incomes have fallen.Which of the following best explains the falling prices of airline tickets? Assume that airline tickets are a normal good.
A)The supply curve for airline tickets has shifted to the left while the demand curve for airline tickets has shifted to the left.
B)The demand curve for airline tickets has shifted to the left more than the supply curve has shifted to the left.
C)The demand curve and the supply curve for airline tickets have both shifted to the right.
D)The supply curve for airline tickets has shifted to the left more than the demand curve has shifted to the left.

Question

Quizplus · Accepted Answer

The decrease in demand for airline tickets due to falling consumer incomes and the increase in supply of airline tickets due to the rise in competition among airlines has led to a leftward shift in the demand and supply curves. However, the fact that prices have fallen despite the rise in jet fuel prices implies that the demand curve has shifted to the left more than the supply curve, which has resulted in a decrease in equilibrium prices.

Prices of Commercial Airline Tickets Have Fallen in Recent Months