Question: QUESTION THREE(20 Marks) The table below represents the demand and supply schedules for Cheap1 Airlines, a low cost domestic airline. Table 3.1: Daily demand and
QUESTION THREE(20 Marks)
The table below represents the demand and supply schedules for Cheap1 Airlines, a low cost domestic airline. Table 3.1: Daily demand and supply schedule of Cheap1 Airlines for the Durban to Johannesburg route.
Price of air tickets (Rands)
Quantity demanded (tickets/day)
Quantity supplied (tickets/day)
500
300
50
600
250
100
700
200
150
800
150
200
900
100
250
1000
50
300
1100
0
300
- Plot the supply and demand curves on the same set of axes. Explain what is unusual about the supply curve and why might this be true. (12 marks)
- What is the equilibrium price and quantity of the air tickets? (4 marks)
- Suppose there is a decrease in the number of tourists going from Johannesburg to Durban. The relevant curve changes by 25 units at each prevailing price.
- Plot the effect of this decrease on your existing diagram in 3.1, clearly showing the new equilibrium price and quantity of air tickets. (4 marks)
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