We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Air Travel as an Example of an Elastic Good - Essay Example

Free

Extract of sample
Air Travel as an Example of an Elastic Good

We shall, hence, carry out an assessment based on past studies of how air travel qualifies as an elastic good with regard to these factors. Closeness of substitute goods It is understood that a change in price for substitute goods can affect the price elasticity in demand of a product. A downward shift in the prices of substitute goods will consequently decrease the demand for a product. This is because the utility gained from the substitute product is equivalent to that of the main product. Conversely, an upward shift in the prices of substitute good will affect the price elasticity in demand of the product in a similar manner. To measure the elasticity of a product with respect to changes in price from substitute products, we use the cross price elasticity index. The cross price elasticity of demand is the ratio of a percentage change in the product’s demand to a percentage change in its substitute’s price. Cross price elasticity = ?X­d/? Yp (Where ?X­d is the percentage change in demand for the product and ? Yp is the percentage change in price for the substitute.) In air travel, an accurate measure of cross price elasticity can be extracted by comparing the prices of alternative transport methods to a given route. Another measure that can apply is the prices of alternative destinations of equal distance for the same travel purpose. In this line of thought, we consider two different destinations that both serve as recreation spots for travelers who use a certain airport. A traveler may

Check these samples - they also fit your topic

External and Competitive Environment for tourism Industry
Tourists could be found all over the world be it the Great Wall of China, Malaysia referred to as Truly Asia, the tourist attractions in Florida or the Canary Islands. However, it is very interesting that some countries of the world heavily rely on their tourism industry as a source of income.
6 pages (1500 words)Essay
Example
In a day and age when it is politically correct to do the “environmentally friendly” thing while governments look to capitalize with big profits from endorsing the green industry, Americans have been conditioned and indoctrinated to believe that driving hybrids and fully electric cars is the morally right thing to do - as American as apple pie.
3 pages (750 words)Essay
Price elacity and discremination
Time of use-lower price at a lower peak and a higher price during peak times. The time the unit is bought, for instance discount is given for buying early. The major principle behind this price discrimination is that airline businesses are trying to utilize various price elasticities of demand (Holloway 25-29).
7 pages (1750 words)Essay
Marketing Revolutionary Air Travel
Today, there are about 95,000 UHNWIs worldwide, with at least US$30 million in financial assets (Capgemini U.S. LLC, 2006). When they fly, they assign a high priority to punctuality and excellent airport and in-flight service. They look for seating comfort, want a separate cabin for sleeping and working, have impeccable taste in food and entertainment, and are accustomed to personalized service.
2 pages (500 words)Case Study
Delta Air Lines: What Good Goes around
As of September 24, 2005, the company recorded revenues of $15,002 million during the fiscal year that ended December 2004, an increase of 6.5% over 2003. The increase was primarily attributable to a 5.9% increase in the company's revenues from passenger services.
3 pages (750 words)Essay
Price-Elastic Products
This is just the opposite as in the case of monopoly, where a firm could put up prices and make profits. Having price elastic good doesn't mean you are unprofitable (e.g. electronic goods). Similarly, having inelastic demand goods doesn't make a firm profitable always.
2 pages (500 words)Essay
Marketing in Airline Industry
Business firms have realized that they cannot survive without marketing. Marketing plays a significant role in the sustainability of an organization. In this paper, marketing in service industries is discussed (ICFAI Center for Management Research (ICMR)).
5 pages (1250 words)Essay
A good example of sociological perspective
The caste system is a good example of sociological perspective, since it creates an identity seperation among humans. The caste system, which in
1 pages (250 words)Essay
In 300 words, please describe how physics (for example: Newton's Laws, relativity & light speed, etc.) affect our ability to create space ships that can travel long distances
Newton’s first law of motion states that any object in a state of motion remains in this state of motion unless an external force is applied upon it. Since space has no air or any other forces in it, it means that a
1 pages (250 words)Essay
The Impact of E-Commerce Technology on the Air Travel Industry
Therefore, for each organization to survive, they need to come up with novel and creative ideas. This was the sole reason behind the invention of the SABRE (Semi-Automatic Business Research Environment)
3 pages (750 words)Essay
opt for one of the two touring destinations depending on which one is more affordable. In a study carried out by InterVISTAS Consulting Inc. (29), the price elasticity of route-specific air travel options was found to be approximately -1.4 and this implied a significant effect of price changes in route-based substitutes for air travel to demand. Furthermore, a study carried out by Gillen, Morrison and Stewart (1) revealed that the price elasticity in demand for air travel reduces as the length of a flight increases. This is clearly due to the lack of available substitutes for a number of long distance travel routes. Proportion of income spent on the good The tendency for people with low income to demand less of air travel with any price increase is apparent. This is due to the relatively large costs that it presents to most consumers. This is because the proportion that such a cost would represent to their income will be much higher than that of a high-income traveler. The InterVISTAS study (9) confirms that an increase in the travellers’ income results in increased overall demand for air travel. Results from the study showed that the income elasticity for different air travel products ranged between +1 and +2. This once again shows that air travel has a high price elasticity. In this case, the positive sign demonstrates a positive relation in that an increase in income relates proportionally to an increase in air products purchased. Such income elasticity can be calculated by expressing the percentage change in demand as a ratio of the average percentage increase in income. On a similar note, research findings made by Kenneth J. Button (46) provide similar results. The income elasticity of North Atlantic Travel was rather high at figures extending up to +4.38. Trips from Australia on recreational travel offers settled at approximately 2.1.

Summary

Name Instructor Subject Date Air Travel as an example of an elastic good Introduction Elasticity is the level of sensitivity that a product bears to price changes. This sensitivity can be reflected by changes in demand and/or supply. Larger changes in demand and supply after a price movement will, hence, imply high price elasticity…
Air Travel as an Example of an Elastic Good
Read TextPreview
Comments (0)
Click to create a comment or rate a document
Let us find you another Essay on topic Air Travel as an Example of an Elastic Good for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us