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1.3 Price determination in a competitive market

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Question 37

Extract B

Figure 2: Indices of Vitarian domestic air fares and passenger journeys, 2008–2021 (2008=100)

Line graph showing indices of domestic air fares, consumer prices, and passenger journeys in Vitaria from 2008 to 2021. The index for domestic air fares starts at 100 in 2008, rises steadily to 158 in 2019, falls to 130 in 2020, and rises to 142 in 2021. The Consumer Price Index (CPI) starts at 100 in 2008 and rises steadily to 139 by 2021. The index of passenger journeys starts at 100 in 2008, rises to 170 in 2019, collapses to 110 in 2020, and recovers to 135 in 2021. This indicates strong co-movement between air travel demand and air fares.

YearIndex of domestic air fares (solid line)Consumer price index (dashed line)Index of passenger journeys (dotted line)
2008100100100
20099510292
2010102105104
2011108108110
2012115112118
2013120115124
2014128118132
2015135121142
2016140123148
2017145126155
2018152130164
2019158133170
2020130135110
2021142139135

Explain how the data in Extract B (Figure 2) show that in Vitaria, between 2008 and 2021, changes in the demand for domestic air travel contributed to changes in the price of domestic air travel.

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1.3 Price determination in a competitive market Questions

  1. A Level
  2. /Economics
  3. /1.3 Price determination in a competitive market