Identify the method of thermal energy transfer at work
in hot air balloons. Explain how thermal energy is
transferred in this scenario.

Thermal energy in air can be transferred through convection,
Hot air usually rises as the thermal energy would be converted into kinetic energy in particles, which causes the particles to move faster and further apart, causing hot air to be less dense and therefore rises,
Cold air has less thermal energy to transfer into kinetic energy, which causes particles to not move as fast and closer together, causing cold air to be more dense and sinks,
Now for the example of hot air balloons, the pilot heats the air and as the air gets hotter the balloon will expand which causes its density to drop, therefore floating above the cold air,
Hope this helps ;)