Elasticity of Airline Industries Presented by Cedric Knight Renee Singh Sheri Slusher Wave Robinson Said Aouita

Introduction The relationship between the price of a commodity and the quantity demanded Price competition Balancing price with an acceptable level of service Price elasticity of demand Responsiveness (or sensitivity) of consumers Price change is measured by a product Airline industry strange to this economic principle

Introduction (cont.) Specific markets Low prices stimulate additional air traffic Southwest airlines introduced low fares in the market Evidence of the airline industries price elasticity Low fare carrier Beginning of operations at New York City's third airport, Newark

Airline Industry Price of a commodity and the quantity demand Airline Deregulation Act of 1978

Price of Elasticity of Demand Economic principle – elasticity of demand A recent study published by Roberts, Roach & Associates

Evidence Southwest airlines introduced low fares in the market between Baltimore and Cleveland The average one-way ticket went from $193 to $56 Traffic increased from 89 passengers a day in each direction to 781

Additional Evidence An airline know as PeopleExpress in the early 1980’s provided data of the airline industries elasticity. Location New York City’s third airport, Newark Accounted for roughly 70% of New York’s domestic traffic in 1980’s

Low Fare Higher Frequency Stimulated traffic by more then 60% Producing nearly 14 million additional passengers annually People Express failed and withdrew from the markets most of the new traffic disappeared.

Proof

Conclusion The relationship between the price of commodity and the quantity demand. Low prices dramatically stimulate additional air traffic.

Questions

References arch='price%20elasticity%20airline arch='price%20elasticity%20airline