Assume that due to an increase in demand, the average domesticairline fare increased from $319.85 in the fourth quarter of 2013to $328.12 in the first quarter of 2014, an increase of $8.27. Thenumber of passenger tickets sold in the fourth quarter of 2013 was151.4 million. Over the same period, the airlines’ costs remainedroughly the same: the price of jet fuel averaged around $2 pergallon in both quarters, and airline pilots’ salaries remainedroughly the same, averaging $117,060 per year in 2013). Can youdetermine precisely by how much producer surplus has increased as aresult of the $8.27 increase in the average fare? If you cannot beprecise, can you determine whether it will be less than, or morethan, a specific amount?
