Cheap Jet Fuel
The question
The market for domestic airline tickets in the country of Norvale is initially in equilibrium. A new refining technique sharply lowers the price of jet fuel, the largest single operating cost for Norvale's carriers. Assume travelers' incomes and the cost of traveling by car or rail are unchanged. Show the effect on the market for domestic airline tickets. Show the effect on the Supply and Demand graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Cheap Jet Fuel: the worked answer
On the Supply and Demand graph, Supply shifts right.
Why Supply shifts right
Input prices are a determinant of supply, and jet fuel is the largest operating cost for these carriers. A much cheaper input lowers the per-unit cost of flying each seat, so airlines are willing and able to offer more seats at every fare and the supply curve shifts right. Travelers' incomes and the cost of the substitute travel modes are unchanged by assumption, so no demand determinant moves and the demand curve stays put.
What happens to the equilibrium
The equilibrium fare falls and the equilibrium number of tickets sold increases.
The mistake students make on this one
Most students who miss this shift demand right as well, because more people fly once fares drop. Those extra passengers are an increase in quantity demanded along a fixed demand curve, pulled out by the lower fare; nothing changed travelers' incomes, tastes, or the price of any substitute.
On exam day
Trace the shock to whoever actually pays the bill: airlines buy the fuel, so a cheaper input enters through supply, and the lower fare that follows moves passengers along their own demand curve.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Supply shifts right and every other curve on the Supply and Demand graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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