Industry Research Completion Airlines
The airline industry is largely affected by price suppleness of supply and demand, positive and negative externalities, wage disparity and monetary and economic policies (Heppenheimer, 1995). Supply and demand rise and fall according to current market state of affairs, reason for travelling and alternative means of travel. Occurrence of disasters, accidents and attacks and rise in fuel costs add up to the externalities that impact on the airline industry. Monetary and fiscal policies include deregulations which often result into instability of air tickets rates and labor charges. Nonetheless, it is important to note that the world is always changing and change in economy has a corresponding change in industry.
To understand basic concepts of economics, it is important to clearly understand what it is comprised of. Economics is basically a profile in which men make their choices in use of resources that are limited in supply to produce commodities which are then distributed to other people. Limited resources call for informed decisions and it is at this point that issues like supply and demand come in. Resources are limited by two factors: how intricate it is to have the resources reach people and how bad the resource is needed.
Supply and demand are related to price elasticity in one way or the other; this also applies to the airline industry. To understand how this goes, both functions are analyzed differently and then a connection to economics established. It is also imperative to know the causes of change in supply and demand; changes in price influence market equilibrium and necessity of a product influences the price elasticity. Elasticity is a gauge of sensitivity of the amount demanded and that supplied as a result of the price changing. The airline industry hinges as per the current marketing conditions which are inclusive of market unpredictability, inflation, increase and decrease in terrorism. However, if customers were willing to pay a constant cost that incorporates all these uncertainties, ticket costs would never change; this may be unachievable as many airlines decrease costs as a marketing strategy whenever market conditions allow them to operate under minimal operating expenses.
In addition to market conditions, another factor that greatly influences supply and demand hence price elasticity in the airline industry is the reason for travelling. Travelling can be classified into two classes: for business purposes and for leisure purposes. Passengers who take flights for business have limited time schedules and have no choices even when prices escalate; passengers whose aim is leisure have an option of taking flights only when they are cheap. Airlines elevate prices in locations targeting business people while they lower their prices to target the leisure market. Some airlines have business class planes so as to maximize this lucrative avenue.
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