Suppose there is a reduction in consumer income and an increase in the price of jet fuel, an important resource used to produce air travel. If air travel is a normal good, how will these changes influence the price and quantity of air travel? The price of air travel will (be) ____ and quantity purchased will (be) ____.
A)decrease; indeterminate
B)increase; indeterminate
C)decrease; decrease
D)indeterminate; decrease

Question

Suppose there is a reduction in consumer income and an increase in the price of jet fuel, an important resource used to produce air travel. If air travel is a normal good, how will these changes influence the price and quantity of air travel? The price of air travel will (be) ____ and quantity purchased will (be) ____.
A)​decrease; indeterminate
B)​increase; indeterminate
C)​decrease; decrease
D)​indeterminate; decrease

Quizplus · Accepted Answer

A reduction in consumer income, assuming air travel is a normal good, would decrease demand for air travel, potentially lowering the price and quantity. An increase in jet fuel prices would increase production costs, potentially increasing prices but decreasing quantity supplied. The overall effect on price is indeterminate because of opposing forces (demand decrease might lower prices, but cost increase might raise them), but the quantity would likely decrease due to both decreased demand and decreased supply.

Suppose There Is a Reduction in Consumer Income and an Increase