Principles of microeconomics

Southwest Airlines and the expansion of the Hobby airport international terminal.10 points = 100/10

Based on the information provided below and your additional research if appropriate, answer the following questions:

1. What is the current level of competition on short haul international routes in Houston? Provide data to support your answer. (10pts)

2. Using the model of supply and demand, represent the expected changes in the market for short haul international air travel as Hobby airport expands to include an international terminal and Southwest Airlines provides flights on short international routes. (60 pts)

   1. Find the factors that would lead to a change in demand and/or supply.

   2. Describe the new market equilibrium (price and quantity)

   3. Does the new equilibrium match the expected result of the expansion

      according to the report of the director of aviation Houston Airport

      System? Provide data to support your answer.

3. Use your knowledge of supply and demand, to explain why United Airlines

   opposed the expansion plan by Southwest airlines. (15 pts)

4. Find supporting evidence that competition makes markets more efficient in

   this case. (15pts)