Asked by Darian Clark on May 11, 2024
Verified
"The operator of the tunnel that links Britain and France, Eurotunnel, said that commercial and tourist traffic using its car and coach shuttle service had fallen sharply in 2004, leading to a drop in operating revenues of 4%. Eurotunnel's chief executive, Jean-Louis Raymond, blamed cut-throat competition from budget airlines." (news story, January 2005)
A) If Mr. Raymond is correct, are the services of airlines and Eurotunnel substitutes or complements?
B) Use demand and supply analysis to explain how lower airfares between Paris and London impact the market for the shuttle services of Eurotunnel.
Eurotunnel
A major infrastructure project, also known as the Channel Tunnel, that connects the UK and France beneath the English Channel.
Commercial Traffic
The movement of goods and services or the flow of commercial transportation vehicles within a specified area or route.
Budget Airlines
Carriers that offer low flight fares by minimizing operating costs and providing fewer amenities compared to traditional airlines.
- Investigate the effects of alternatives and complements on the fluctuations in the market.
- Analyze the effect of competition on market operations and services.
Verified Answer
SS
Sandra SanchezMay 17, 2024
Final Answer :
A.substitutes
B.The lower airfares shift the demand for the shuttle services to the left, leading to a reduction in both the number of units sold and the revenues derived from the service.
B.The lower airfares shift the demand for the shuttle services to the left, leading to a reduction in both the number of units sold and the revenues derived from the service.
Learning Objectives
- Investigate the effects of alternatives and complements on the fluctuations in the market.
- Analyze the effect of competition on market operations and services.