Ib Economics Commentary 1 - Microeconomics Essay - 807 Words

Commentary #1 Syllabus Section: Section 1: Microeconomics Word Count: 749 Date commentary was written: October 26, 2012 Date article was published: May 20, 2012 Rebecca Bundhun, (October 19, 2012) Cost of summer getaways hit as air ticket prices rise, The National, http://www.thenational.ae/thenationalconversation/industry-insights/tourism/cost-of-summer-getaways-hit-as-air-ticket-prices-rise The cost of an airline ticket can fluctuate tremendously based on a number of factors. The goal of airlines is to maximize their capacity by having the greatest number of passengers on all trips. This may however be difficult, as airlines pricing is not only dictated by their own operating costs and profit margins required but they have to†¦show more content†¦Although prices tend to be set by supply and demand, they are also exposed to externalities. An externality occurs when the actions of consumers or producers give rise to positive or negative side effects on other people, who are not part of these actions and whose interests are not taken into consideration. A perfect example of a negative externality is the rise of jet fuel. As a barrel of oil rises, the price of jet fuel also rises and consequently the price of an airline ticket also rises. Externalities can create a positive or negative demand or effect on a product or service. Price elasticity of demand is a term that helps us understand the measure of the responsiveness of the quantity demanded to changes in price. In general, if there is a large responsiveness of the quantity demanded, the demand is referred to as being elastic, if there is a small responsiveness, demand is inelastic. Airlines take advantage of the existence of inelasticity. Mr. D’Souza states in the article, â€Å"People are still flying. People traditionally plan these breaks, and regardless of the price, they fly. The demand is very, very high.† On the contrary, airlines understand price elasticity and use this well. They know that fare prices can be considered both elastic and inelastic based on the circumstance the traveler finds themselves in. Airlines study their client base, theirShow MoreRelatedEconomics IA: Microeconomics Commentary on Heathrow Slams Price Cap Put On Airline Fees Word count:700 Words   |  3 PagesEconomics IA: Microeconomics Commentary on Heathrow Slams Price Cap Put On Airline Fees Word count: 746 Michael Lee The article is about the government trying to control price of airlines of Heathrow Airport. CAA has set a price cap on the fee Heathrow Airport charges the airline firms, wishing that this will lead to lower price in the flights for consumers. Maximum price, also referred as price ceiling, is usually set by government to limit the seller pricing system to ensure a fair and reasonableRead MoreIb Economics Notes Grade 113816 Words   |  16 Pagessame rate as P. If %∆Plt;%∆Q, this good is called relatively elastic. If %∆Pgt;%∆Q, this good is called relatively inelastic. If %∆P=%∆Q, this good is called unit elastic. Determinants of the PED -gt;Things that tell us what the PED is originally. 1) availability of substitutes –the more substitutes a good has, the easier it is for consumers to switch products if the price changes EX: if one brand of T-shirt is more expensive, choose another brand. In other words, for T-shirts, a relatively smallRead MorePMCN Case Study3324 Words   |  14 PagesThe theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions. The ideas of economists and politicians, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual