Supply_and_Demand_Paper

Supply, Demand and Price Elasticity Paper Axia College XEco 212 In this paper we talk about how supply and demand play in how the price elastic of airline tickets. For one to have a better understanding of what is supply and what is demand let’s look at what the definitions are for these two words so we can better see how the supply and demand effect the airline ticketing process. So first the definition for supply is: “to give, sell, or make available something that is wanted or needed by somebody or something”. (Encarta® World English Dictionary, 2009). So for airlines tickets to have a supply they has to be a need for that airline to fly to any given region or area. The supply of seats on a plane that are sold will help guide an airline in how many flights they will want to fly to and from one designation to another. “Now let’s look at the definition for demand is: customer interest in acquiring something: the level of desire or need that exists for particular goods or services. “Demand for the model id outstripping the supply”. (Encarta® World English Dictionary,2009) So for demand by its definition plays its role in the supply chain is if they supply of that good or service is being demanded over the amount that is offered. So if a flight that has so many seats for sale the “supply” for a curtain location it will cause a greater demand for those seats in causing the price for those tickets to be raised and be sold for a higher price. So when the demand for the tickets are needed this causes the price of elasticity to take place and allow the change in price for the supply. With this price increase would move the demand curve to the right and have an effect on the quantity of tickets that are to be sold. As the prices rise for these products it can have an effect on the sales of these goods and services. Or it will not have an effect just depends on the timing of the flights and time of year. Other factors airlines have to look at when trying to seeing if prices hikes are needed is the cost of fuel needed for each flight. When the price of oil is on the rise airlines have to think when we need to raise prices to cover cost of fuel. Airlines here lately have added these price hikes in with added fees to consumers. Such as fees for baggage that weight more than 50 lbs. up to 100lbs. This will cost a consumer around $175 dollars and if a person checks in more than two suitcases it will cost them another $100’s. These are just a few added fees airlines use to help cover cost for fuel. Airlines have been hit hard with the activities of September 11th, 2001 attacks as well the recent economic down fall from 2008 to present time. “The airline industry has claimed that it has lost a collective loss of $55 billion dollars and 160,000 jobs in America sense 2001”. (N.B., 2011) To have the service of buying an airline ticket is more of a luxury good rather than a necessity. Being able to jump on a plane allows a person to travel longer distances in less amount of time then it would take driving a car. This is why it is a luxury because of the fast rate a plane can move and how it can save time in having to stop and get gas, food, car problems and stopping at hotels for rest. So some substitutes for instead of purchasing airline tickets is either taking a bus like the gray hound travel bus where it will cost less than the high priced airline ticket. Or just drive your personal vehicle and visit neighboring states or visit local attractions. Last you can take use train transportation such as Amtrak. Airlines ticket sales are both price elastic and inelastic, the prices are always changing to the time of year and what holidays that are up and coming. When air travel is in its off peak travel time prices will be set at a price where they will try to attract more flyers. As to when holidays like Thanksgiving and Christmas the demand for airline tickets that the supply of flights will shift and cause the shift in the demand for more flights and airlines to compete for buyers to fill their planes and will do it by hiking prices up by 10 percent of more. Consumers will not care about the price hike and pay the added fees and higher prices to get their destinations faster to spend more time with family members. At the high peaks of traveling people will look for the fastest method of travel and if taking the bus or driving their personal vehicle or even being lucky enough to get a flight will not have an effect on the elasticity of the prices and quantity of tickets for sale. People will pay whatever price airlines have set even if it will cost lest to use one of the substitutes people these days just want to get from point A to point B as fast as they can no matter the cost. No matter what the price of airline tickets reach people will pay to use these services offered. Fees will only keep people away for a very short time and then it will be just another normal thing we see on a daily basis. Where airlines in thee end will get what they want out of the consumers. Reference Page: Definition of Supply Encarta® World English Dictionary[North American Edition] © & (P) 2009 Microsoft Corporation.All rights reserved. Developed for Microsoft by Bloomsbury Publishing Plc. Retrieved on September 17th, 2011 from web site http://www.bing.com/Dictionary/search'q=define+supply&qpvt=what+is+supply+&FORM=DTPDIA Definition of Demand Encarta® World English Dictionary[North American Edition] © & (P) 2009 Microsoft Corporation.All rights reserved. Developed for Microsoft by Bloomsbury Publishing Plc. Retrieved on September 17th, 2011 from web site http://www.bing.com/Dictionary/search'q=define+demand&qpvt=what+is+demand%3f&FORM=DTPDIA N.B. Sept, 2011, Welcome to the autumn fare hike, The Economists Retrieved on September 18th, 2011 from web site http://www.economist.com/blogs/gulliver/2011/09/airline-ticket-prices