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Inflaction & the Airline Industry

EFFECTS OF INFLATION ON CONSUMER BUYING HABITS: AIRLINE INDUSTRY

The purpose of this research is to discuss the effects of price inflation on consumer buying habits. The focus of this discussion is the relationship of price inflation and consumer behavior with respect to the airline industry

Demand, in economic theory, is defined as the quantity of some productùeither a good or a serviceùthat is either needed or desired by one or more consumersùan individual person, a single firm, or a group of individuals or firms. Individual demand is the quantity of a product required by a single entity, while market demand is the sum total of the requirements of all consumers for a product. Overall, demand is defined as a schedule of the total quantities of a good or service that purchasers will buy at different prices at a given time. Air transportation is a product that is subject to demand by consumers.

A change in demand refers to the change in the quantity of a good or service that would be purchased for some reason if prices for the good or service did not change. Thus, a massive and unexpected snowfall could cause an increase in the demand for automobile tire chains in the absence of any change in the price charged for tire chains. Similarly, an unexpected tropical storm in the Caribbean could cause a decrease in the demand for air transportation to the area regardless of the price of the fare.

Changes in product demand in relation to product price reflects the price elasticity of demand of the product. A low price elasticity of demand means that the proportionate change in demand is less than the proportionate change in price. A low price elasticity of demand may, in some instances, indicate that a firm or an industry may maximize revenues by raising prices. Alternatively, however, a low price elasticity may indicate that a firm or industry enjoys a significant competitive advantage.

A high price elasticity o...

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Inflaction & the Airline Industry. (1969, December 31). In LotsofEssays.com. Retrieved 01:09, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1693488.html