Economic Profile of the Airline Industry

Paper Summary:

This paper examines how the airline industry is affected by market tendencies and externalities and how the the elasticity of demand in this industry is determined by the existence of other transportation means.
The paper notes the extreme instability of the airline industry and discusses the various factors affecting it. The impact of the market environment, volatile ticket prices, the cost of fuel, and calamities such as the tragic events of September 11, 2001 are all discussed in the paper. In addition, the paper discusses how the airline industry has taken advantage of living wage regulations to diminish its turnover rate and increase labor effectiveness.

From the Paper:

"Externalities are very important in shaping supply and demand due to the fact that the airline industry is a direct creation of market requirements. After the September 11th tragedy a decrease in airline travel was noticed by specialists, mostly because of safety concerns. At times when there is an enormous boost in tariffs, the cost of tickets grows in view of the fact that there is a clear relationship amid supply and demand. When there is a decreased employment rate, and when there is a strong dollar, citizens are inclined to travel more."

Sample of Sources Used:

• Gregory Mankiw (2004) Principles of Economics, 3e, Mankiw
• InnovativeThinker. (2007) Economic Profile of the Airline Industry. Retrieved Feb 1, 2008, from Associated Content, Inc. Web site: http://www.associatedcontent.com/article/435732/economic_profile_of_the_airline_industry.htm
• Wei, S. (2006). Analysis of aggregate Passenger Routes in Air Travel: An Atlanta-Based Study. Southeastern Geographer, Volume 46, Issue 1, page 139. Retrieved Feb 1, 2008, from web site: http://proquest.umi.com.ezproxy.apollolibrary.com
• Recent Policy Initiatives to Raise Low Pay. (2004). Retrieved Feb 1, 2008, from ACORN.ORG: https://www.acorn.org/index.php?id=203
• FRBSF Economic Letter. (January, 2002). Airline Competition. Retrieved Feb 1, 2008, from Olin Business School- Washington University: http://www.olin.wustl.edu/faculty/gowrisankaran/pdf_papers/airline_competition.pdf

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