/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q. 4.7 The table below illustrates the ... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 4: Q. 4.7 (page 93)

The table below illustrates the demand and supply

schedules for seats on air flights between two cities:

What are the market price and equilibrium quantity in this market? Now suppose that federal

authorities limit the number of flights between the two cities to ensure that no more than 1,200 passengers can be flown. Evaluate the effects of this quota if price adjusts. (Hint: What price per

flight are the 1,200 passengers willing to pay?)

Short Answer

Expert verified

$600

Step by step solution

01

Step1. Given information

The government imposes restrictions on the number of people that an airline can fly.

02

Step2. Explanation

Market equilibrium before the quota restriction is 1,600 passengers and $400 price as observed from the table, i.e., the point of intersection/ where demand equals supply.

Now, the government fixes a quota of 1,200 passengers only that an airline can fly. Hence, the quantity is fixed at 1,200. Which means they can't fly passengers more than 1,200 whatever the price they charge. Therefore, the price will adjust so that people are willing to pay more to be able to travel by air. This therefore increases the price to a level where the quantity demanded is 1,200. Hence, the price will adjust from $400 to $600.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Consider the diagram below,which depicts the labor

market inacity that has adopteda"living wage law"

requiring employers to payaminimum wage rate of

\(11 per hour.Answer the questions that follow.

a.What condition exists in this city's labor market

at the present minimum wage of\)11 per hour?

How many people are unemployed at this wage?

b.Acity councilwoman has proposed amending

the living wage law.She suggests reducing the

minimum wage to\(9per hour.Assuming that

the labor demand and supply curves were to

remain in their present positions,how many

people would be unemployed atanew\)9

minimum wage?

c.Acouncilman has offeredacounterproposal.In

his view,the current minimum wage is too low

and should be increased to\(12 per hour.

Assuming that the labor demand and supply

curves remain in their present positions,how

many people would be unemployed atanew\)12

minimum wage?

Explain the effects of price ceilings

Suppose that in Figure 4-4, the government raises

the floor price of milk above the displayed

\(0.10-per-pound floor price, to \)0.12 per pound.

Will the excess quantity of milk supplied increase

or decrease as a consequence?

Why might transaction costs of locating a replacement clothing item increase with the number of particular features that characterize that item?

Advances in research and development in the pharmaceutical industry have enabled manufacturers to identify potential cures more quickly and therefore at lower cost. At the same time, the aging of our society has increased the demand for new drugs. Construct a supply and demand diagram of the market for pharmaceutical drugs. Illustrate the impacts of these developments, and evaluate the effects on the market price and equilibrium quantity.
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.