Shift in Demand and Supply Curves

Shiftin Demand and Supply Curves

Shiftin Demand and Supply Curves

Effectof Airline organizations colluding to reduce seats and increase price

X1

E

X

e

T1

T

D

C1 C

Whenairlines organizations collude to reduce seat in their respectivecompanies they reduce supply of the air transport services resultingto increase in prices. These effects are shown by shift or change insupply curve, from curve X to X1. The resulting effects are changesin service of commodity demanded from C to C1 and prices from T toT1. The services demanded reduce as indicated by change in C, as aresult of rise in price of airline services to T1. The overall effectwill be a new equilibrium shown by The new E. old equilibrium isrepresented by small e .

Theshift is shown by red arrows.

Effectsof over ambitious plans and actions

D

e

D1

E

p

P1

S

Q Q1

WhenOrganization are over ambitious they expand increase their serviceand outlets. The overall effect would be rise and increase in serviceprovided thus resulting to decrease in price as there is excesssurplus due to ambitious expansions. This would result in shift indemand curve as a result of increased surplus from Q to Q1 andcorresponding reduction in price from P to P1. And change inEquilibrium, e to E. The shift is shown by red arrows.

Effectof decrease in GDP on Airline Market

D1 D

e

S

E

P

p1

QQ1

GDPis used to calculate the National income per capita, decrease In GDPwould result mean less income in circulation in the Airline market.This would result to decrease in want of Airline services asindicated by change in curve D to D1. The resulting effects would bea reduction in prices, from P to P1 due to reduction in demand inAirline service from Q1 to Q. The new prevailing market equilibriumprice and quantity would be the new E from old e.

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