Elasticity In The Airline Industry

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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
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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

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