Elastic Demand In Airline Industry

Elasticity is a term that describes how much the demand or supply for a product or service changes in relation to that product’s price. Each product on the market today has a different level of elasticity. Products considered to be necessities by a majority of consumers are typically less affected by price changes, causing them to be less elastic. By contrast, if consumers do not consider a product to be essential, they are likely to buy less of it if the price is increased, making that product elastic.

The two markets I choose to discuss are Airline Industry which will be characterized by an elastic demand and Pharmaceutical Companies (Insulin) which will be characterized by an inelastic demand.

Elastic demand means that demand for a product

Events such as inflation, terrorist attacks, and the price of oil have greatly influenced the demand for airline tickets throughout the years. Competition consistently affects the price of airline tickets because it gives the customer other options. Substitutes that are existence is traveling by train, car, or avoiding travel whenever possible. Customers have resorted to all named substitutes during turbulent times in our economy. The elasticity of demand is greatly affected by the customer's purpose for travel. Airline customers typically fly for business or pleasure. With the wave of technology, a large percentage of business travel has been eliminated to conserve

In economics law of supply and demand states that, all things being equal, is the price for something increases the demand will drop. This is generally true, however in a few special cases demand reaches a point where it will not change regardless of price movement. Examples of inelastic demand include the minimum amount of inferior quality (low cost) food that is required to sustain a population.

Insulin is one of the good examples of inelastic demand. Prices may increase for this product; customers will not hesitate to engage in a transaction, especially when it involved a matter of life and death. The only reason why production companies like this don’t increase prices of insulin is because of fear of government regulation.

Demand for insulin is inelastic because, regardless of how much the price of it increases, people with diabetes will still need it to survive and will end up paying the price for it, whether it increases $1 or $10. When the insulin price changes, there is little or no variance in the demand of it. The demand for goods that even though its price has increased, buyers will still want to buy