ipl-logo

Elasticity In The Airline Industry

745 Words3 Pages

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. Every product on the market today has an alternate level of elasticity. Products considered necessities by a majority of consumers are typically less affected by price changes, causing them less elastic. In other word, if the product is not considered essential for the consumers they are likely to buy less when the price increased, making that product elastic.
The two markets I choose to discuss are Airline Industry which will be characterized as an elastic demand and Pharmaceutical Companies (Insulin) which will be characterized by an inelastic demand.
Elastic demand means that demand for a product is sensitive …show more content…

The elasticity of demand is based purely on current market condition. The tragedy that happened on September 11th had a huge negative effect in the travel industry. It did not only create a disaster but it also affected the fiscal and monetary policies, supply and demand, and it causes staffing problems nationwide. The airline industry is being looked at as unstable due to the current market conditions. The market constantly changes, the purpose of travel has a possibility to change, there is also other transportation available such as bus, car, train, ferry etc. Externalities keep on influencing the elasticity of …show more content…

In economics law of supply and demand states that all things being equal, is the price of 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 least 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. 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

Show More
Related

  • Southwest Airlines Case Study Essay

    1023 Words  | 5 Pages

    Case Analysis #1 – “Southwest Airlines: Is It Still the King of Cheap Flights” 1. Answer the questions at the end of the case. 1. Airline customers can be segmented in a variety of ways. Two of these include by purpose of travel and their destinations.

    Read More

  • Case Study Of American Airlines Pricing Strategy

    806 Words  | 4 Pages

    INTRODUCTION “The moment you make a mistake in pricing, you 're eating into your reputation or your profits.” - Katharine Paine The above quote from the founder of KDPaine & Partners LLC and The Delahaye Group is quite apt. Pricing is quite often ignored by executives & leads to people not understanding how it can change the competitive game in an industry.

    Read More

  • Transnational Strategy Of Lufthansa

    1545 Words  | 7 Pages

    For worldwide airline industry, opportunities can emerge from new client expectations, items, business sector structures or regulatory

    Read More

  • Toyota General Environment Analysis

    1506 Words  | 7 Pages

    Price and demand of an item is significant viewpoint which must be considered by Toyota in promoting economy as price and demand impact purchaser what to purchase. Customer’s demands all the more in lower price and less at higher price. Price elasticity of demand is a measure of the greatness by which customers modify the amount of some item that they buy in light of progress in the price of that item Boyes and Melvin (2012). Price elasticity of demand will help Toyota to decide the amount an

    Read More

  • Coca Cola Demand Curve

    1041 Words  | 5 Pages

    DEMAND CURVE Demand is defined as the different quantities people are willing to buy at different prices. As the price of good increases the demand decreases and vice versa. The law of demand states shows an inverse relationship between price and quantity demanded. The demand curve shows the relationship between the quantity of a good a consumer is willing to buy and the price of the good. The equation for that shows the relationship between the quantity demanded and price is as given below: QD =

    Read More

  • Honda Market Segmentation

    797 Words  | 4 Pages

    It could be defending on the markets size and growth, like how large is the market, is the market segment substantial enough to make profit for the company (market segment by measuring numbers of customer include sales value or volume). The best characteristics for consumer market particularly is based on every side, like example is behavioral segmentation, the marketers can know product usage rates, whether the consumer is brand loyalty and even benefits that consumer

    Read More

  • The External Environment In The Airline Industry

    1563 Words  | 7 Pages

    External Environment Industry Analysis The goal of the industry analysis is to recognize the external environmental factors which have potential impact on the industry. The first part gives an idea about the airline industry profile. Airline industry, in the last decade, has been growing strongly at 7% per year for both through tourism and businesses divisions and is one of the most competitive, globally, contributing to economic growth, trade, investment and tourism.

    Read More

  • Political And Environmental Factors That Affect The Airline Industry

    885 Words  | 4 Pages

    Economic Environment Factors such as Crude oil prices, aircraft prices, Economies of Scale may also have effect on the airline industry. Social Environment Tourists and Business travellers contribute to the growth of the airline industry. Technological The use of modern technology by the airline manufacturers can contribute significantly to the growth of the

    Read More

  • Holiday Inn: Porter's Five Forces Of Industry

    1384 Words  | 6 Pages

    Social Growing competition and capacity amongst airlines, lower air fares and more relaxed travel restrictions in many regions have made international travel a viable option for an increasing number of people coming to

    Read More

  • Business Strategy Case Study: Delta Airlines

    742 Words  | 3 Pages

    • Threat of substitute goods: Threat of substitute good is high in this industry. If a private company or government introduces any fast road transportation services in the United States, then traveling through airline can reduce. Air travel is somehow costlier than road transport. If the same kind of leisure will be provided in public transport with greater speed, then the share of airline industry can decline. This threat can be reduced if their products offer more value than other substitute

    Read More

  • Strategic Management: Strategies, Deliberate Or Emergent

    3600 Words  | 15 Pages

    With a rise in fuel prices and environmental factors (such as terrorist threats) reducing air travel, airlines continue to struggle. In union environments, where staff (like pilots and flight attendance) is heavily unionized, the industry has not been able to cut their labor costs. New low-cost industry entrants are adding to the pressure the traditional

    Read More

  • SWOT Analysis Of Flydubai: Low Fist Airlines

    1467 Words  | 6 Pages

    For instance, with the global financial crisis and later the Eurozone crisis, the number of travellers has significantly reduced due to economic hardships. This has affected the profit levels of the airline as well as slowed down its growth prospects. The airline also faces intense competition from other low cost airlines forcing it to extensively invest in product differentiation to counter the competition. This is an expensive

    Read More

  • Southwest Airlines Case Study Summary

    747 Words  | 3 Pages

    Ramada’s problem was first discovered when their management found out about D. K Shifflet’s latest survey about customer satisfaction in the hospitality industry, which it then shows that mid-tier hotels continuing to go downward. Later on they continued on their research and decided to hire a third party to find out more about the survey and also to observe their own company’s system. It results in a management dilemma, Ramada needs to prevent themselves from falling. Then it raises some questions on how can their management improve their performance to achieve the level of customer satisfaction they desire. They then found out three main concerns that they need to put more effort to.

    Read More

  • Importance Of Market Structure

    1743 Words  | 7 Pages

    ECONOMICS ASSIGNMENT CLASSIFICATION OF MARKETS AND ITS PRACTICAL IMPORTANCE SUBMITTED BY, REVIN FRANCIS NO-b1488 MBA-A  MARKET STRUCTURE Market structure is defined by economists as the characteristics of the market. It can be organizational characteristics or competitive characteristics or any other features that can best describe a goods and services market. The major characteristics that economist have focused on in describing the market structures are the nature of competition and the mode of pricing in that market. Market structures can also be described as the number of firms in the market that produce identical goods and services. The market structure has great influence on the behaviour of individuals firms in the market.

    Read More

  • Oligopoly Case Study

    1870 Words  | 8 Pages

    This is also where price mechanism takes place because any changes in demand and supply, will affect the price, and eventually balancing the demand to be equal to supply. This is the reason why consumers and producers have no control over the price, and in this situation, everyone is considered as price takers. This causes a horizontal line in the demand curve for the firm’s product(s), as can be seen in Figure 1 (b). Figure 1 There are barely any barriers to enter this market, making it easy to enter and exit according to the firm’s capabilities.

    Read More

More about Elasticity In The Airline Industry

Open Document