Principles of Economics

Principles of Economics

There are numerous principles in economics that do influence pricing. Several articles in a number of journals reflect the prevailing situations in this line in economics. The article put on review in this paper regarding the same is ‘Low-cost air fares: How ticket prices fall and rise’, from BBC news, the link to this article has been quoted in the references. The major concerns in this article stand to be among others the factors that influence ticket prices in the airline industry. Of the major noticeable factors in the airline tickets is their flexibility. To a great extent the major concern of the airline companies seem to been to maximize the number of passengers by filling the seats rather than setting the prices to maximize on profits.

The space between full airline and those of the low cost airline are at a much reduced set of present, this reflects that the low cost airline do not necessarily mean that they are low fare airlines as their business models have additional factors on which they are dependent as the article highlights. A key concern in this article is the rate of fluctuations in the air tickets within the six weeks in which the ticket prices were put on observation. An example portrayed in the Ryanair flight plying London to Rome whose prices did fall on six occasions on the six week period prior to flight. Also highlighted is the concept of classic demand management applied by Ryanair where there is need to increase the air prices when running above the target passengers number to discourage bookings and to reduce ticket prices when running below to encourage more bookings. Also portrayed is the fact that ticket prices tend to be highest when the flight comes closest to departure. Often of concern also is not the destination of the flight that matters, the cost is the first consideration made by most travelers provided it is a sunshine destination or a destination with historic significance.

The cost of airline tickets is typically a function of the supply and demand policy, the prices don’t go on the basis of one price