According to the Bureau of Transportation Statistics, due to an increase in demand, the average domestic airline
Question:
According to the Bureau of Transportation Statistics, due to an increase in demand, the average domestic airline fare increased from $367.17 in the fourth quarter of 2005 to $381.99 in the first quarter of 2006, an increase of $14.82. The number of passenger tickets sold in the fourth quarter of 2005 was 178.1 million. Over the same period, the airlines’ costs remained roughly the same: the price of jet fuel averaged around $1.85 per gallon in both quarters (Source: Energy Information Administration), and airline pilots’ salaries remained roughly the same (according to the Bureau of Labor Statistics, they averaged $135,040 per year in 2005). Can you determine if, and by how much producer surplus has increased as a result of the $14.82 increase in the average fare?
2 The accompanying table shows the supply and demand schedules for used copies of the first edition of a textbook. The supply schedule is derived from offers at amazon.com. The demand schedule is estimated.
Price of Book | Quantity of Books Demanded | Quantity of Books Supplied |
$60 | 30 | 0 |
$65 | 27 | 3 |
$70 | 25 | 7 |
$75 | 20 | 7 |
$80 | 17 | 8 |
$85 | 15 | 15 |
$90 | 12 | 16 |
$95 | 9 | 17 |
$100 | 8 | 29 |
$105 | 2 | 31 |
$110 | 0 | 34 |
Calculate consumer and producer surplus at the equilibrium in this market
Now the second edition of this textbook becomes available. As a result, the willingness to pay of each potential buyer for a second-hand copy of the first edition falls by $20. In a table, show the new demand schedule and again calculate consumer and producer surplus at the new equilibrium.