Economics in the Airline Industr
Axia College of University of Phoenix
Economics
The economics of our nation control everything that we see and do in our daily lives. Free trade determines what cars you are able to purchase, the rate of inflation determines how much you pay for steak at your local grocer, and employment opportunity decisions are often made by the incentives associated with them. Often, people do not evaluate how the decisions they make in their personal life affect the economics of his or her life and if enough people make the same bad choice, the economy as a whole is affected. This was exemplified when people entered into adjustable rate mortgages that they were unable to afford when the rate adjusted. This was also a bad decision on the behalf of the mortgage brokers. Economics are very complex and can be more easily understood when you view how economics relate to and affect a particular industry. Most people have had one experience or another with the airline industry; let’s take a look at it from an economic view by evaluating price elasticity as it relates to supply and demand, externalities, wage inequalities, and monetary fiscal policies.
Shifts and Price Elasticity of Supply and Demand
Have you ever wondered why flights on certain days and during certain times are less expensive than others? This is related to price elasticity and supply and demand. Price elasticity measures the sensitivity of consumers to changes in prices (Gast, 2002). Whereas, supply and demand affects the cost of goods and services in relation to the amount available and how much the good or product is being requested. As a normal reaction, people purchase fewer goods or services when the price of the goo ...