Macroeconomics Questions

The increased security measures imposed on the federal government in the United States affect airline travel primarily because of two effects of the increased security measures. First, some of the cost of implementing the increased security measures in relation to airline travel must be borne by the airline companies. The increased costs imposed on the airline companies will be passed along to air travel consumers because the airline companies are in no position to absorb the added costs. Passing along the added costs will have the effect of reducing demand for air travel to the extent that the demand for air travel is price elastic. More importantly, however, the increased hassles (delays in boarding, intrusive inspections, profiling, invasions of privacy, and so forth) associated with air travel because of the increased security measures have the potential to act as a shift factor of demand, which would shrink the air travel market, as opposed to temporary reductions in demand associated with price elasticity.

The imposition of the increased security measures by the federal government was not an economic policy. Rather, it was a national security policy that also has economic effects. Thus, quite simply, increased security measures were implemented because the federal government determined that national security objectives were more important than economic objectives. The issue is not a question of whether t