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 1980s provided data of the airline
industries elasticity.
Location New York Citys third airport,
Newark
Accounted for roughly 70% of New
Yorks domestic traffic in 1980s
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
References
http://www.r2ainc.com/pdfs/pr_elas.pdf#se
arch='price%20elasticity%20airline