Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 7

Consider the market for plane tickets to Hawaii. A bad winter in the mainland United States increases demand for tropical vacations, shifting the demand curve to the right. The supply curve stays constant. Does total surplus increase or decrease? ( Hint: Sketch out a generic supply and demand curve and look at what happens to the size of the triangle that represents total surplus when the demand curve shifts right.)