2. Assume that the quota limit is 8 million rides. Suppose demand decreases due to a decline in tourism. What is the smallest parallel leftward shift in demand that would result in the quota no longer having an effect on the market? Illustrate your answer using Figure 4-13.
The accompanying figure shows a decrease in demand by 4 million rides, represented by a leftward shift of the demand curve from D1 to D2: at any given price, the quantity demanded falls by 4 million rides. (For example, at a price of $5, the quantity demanded falls from 10 million to 6 million rides per year.) This eliminates the effect of a quota limit of 8 million rides. At point E2, the new market equilibrium, the equilibrium quantity is equal to the quota limit; as a result, the quota has no effect on the market.