Ã¯Â¿Â½PAGE Ã¯Â¿Â½ Ã¯Â¿Â½PAGE Ã¯Â¿Â½1Ã¯Â¿Â½ Airline Industry
In this research paper, I will explain how the economy has affected the airline industry by explaining the shifts and price elasticity of supply and demand as well as provide information about the positive and negative externalities. I will discuss wage inequality. The monetary and fiscal policies have had different impacts on this industry, therefore; I will explain these policies. At the conclusion of my research, will discuss my final thoughts on how the economy affects the success of the airline industry and the economic influences that can affect this industry in a negative way.
The airline industry is highly competitive industry. Although it is necessary to focus on being profitable, the main goal of airlines is to maximize the cost of the flight revenue. In 2006, the airline industry has raised airfares by a lower amount than in past years. One factor that encourages increases in the cost of tickets related to a customer ordering a ticket close to the departing date, defined this as a risk factor because they need to make up for all unsold seats.
When one airline offers a lower tick price than another, the consumers interprets the higher ticket price as an excessive cost. External market conditions such as taxes greatly affect the demand of airline tickets. Because airline tickets are considered to be a luxury good, it is legal to add taxes to the tickets (Button, 2005).
The airline industry is considered to be unstable industry because of various factors. One such factor is that airlines are highly dependant upon current market conditions. The customer's reason for travel and available substitutes also contribute to stability of the airline industry. Various events such as oil prices, terrorist attacks and inflation, have significantly influenced the demand for airline tickets...