Market Demand and Equilibrium Analysis

Question 1

Question 1    (1 mark)

Use the data to calculate the market demand.

Question 2     (3 marks)

Use the demand and supply curve to draw the market equilibrium.

i. What is the equilibrium price?

ii. If the price is set at $6 what is the disequilibrium? How large is it?

ii. If a price is set at $3 what is the disequilibrium? How large is it?

Question 3    (4marks)

Assume that the market for airline travel in the United Arab Emirates is in equilibrium. Using suitable graphs indicate what will be the change in equilibrium price and quantity in response to the following determinants.

a. The price of aviation fuel decrease.

b. The consumers’ income decrease due to the influence of COVID-19 on the economy and airline travel is a normal good.

c. The number of low budget airlines to the national airliner increase and buyer find them as a suitable substitute

d. The new operating guidelines restrict the number of seats per airline.

Question 4      (2marks)

“Despite an overall increase in overnight visitors, Dubai’s hospitality market experienced a challenging year in 2018 compared to previous years. Increasing supply and competition between operators continued to drive reductions average rents and occupancy, which has led to a fall in revenue per available room of 7% between 2017 and 2018 January to August.”-says a study by Deloitte in 2018. What are the likely effects on the demand and supply curve? Use a market equilibrium graph to analyze the situation. Explain your answer.