The British government recently imposed a unit excise tax of about $154 per ticket on airline tickets applying to flights to or from London airports. In answering the following questions, assume normally shaped demand and supply curves.

a. Use an appropriate diagram to predict effects of the ticket tax on the market-clearing price of London airline tickets and on the equilibrium number of flights into and out of London.

b. What do you predict is likely to happen to the equilibrium price of tickets for air flights into and out of cities that are in close proximity to London but are not subject to the new ticket tax? Explain your reasoning.