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Price Elasticity of Supply and Demand in the Airline Industry

Select an industry that is affected by the economy. "Airline"

Research how a current or past event in the industry has caused shifts with the price elasticity of supply and demand. Summarize your research.

Research whether the industry produces public goods or private goods, and whether or not the goods are common resources. Summarize your research.

Find two sources to help you answer the following questions about the industry you chose:

1. In your chosen industry, is price elasticity of demand considered elastic or inelastic? Are there substitutes available? Is the good a luxury or a necessity? Explain.

2. What is the price elasticity of supply for your chosen industry? Explain.

Solution Preview

An airport is a non-rivalrous, excludable resource. It is therefore a public good rather than a common pool resource. Once an airport is built, its use by one person doesn't make it less valuable for others, so it is non-rivalrous. But people can be excluded from it if they are unable to purchase tickets.

This web site:
http://www.mackinac.org/article.aspx?ID=1247
lists the elasticity of demand for various industries. Note that for airlines, the long-run demand is fairly elastic; a lot less tickets will be purchased with price increases. People will simply not fly as much when tickets are expensive, probably because they can't afford it. ...

Solution Summary

Price elasticity of supply and demand in the airline industry is discussed in this solution. About 397 words with references.

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