You own an airline and there is a new housing development located five minutes outside the airport and they are hoping to make a promotional deal with the airline. They want to promote the homes and airlines together to attract customers to buy there and fly with us. Despite the housing development the total population of the region is projected to fall in the next year. Many of your staff think this is a great idea as it would increase flights and provide more hours.

a) Which factor of supply and demand is going to affect the market for your flight?

b)Which line or lines will move on your market supply and demand curve based on this change in variables (if any)?

c) Explanation of an old supply and demand graph showing the old equilibrium, the change happening on the graph and the end result in terms of how a potential shortage or surplus might be resolved and where a new equilibrium sits (if one exists)

d) Will there be a new equilibrium? If yes, will that price at the new equilibrium be higher or lower than at the old equilibrium? Will the quantity at the new equilibrium be higher or lower than at the old equilibrium?