DdSsEssayQ1

 ** (a) ** ** With the aid of diagrams, explain how the recession and the closure of some of the major airlines of the world affected the market for air travel. [10] **   ** __Intro: Mkt for air travel __ **  à  The market for air travel influenced by ** mkt forces of dd & ss  **  à  The theory of ** price determination  ** explains how these events would affect the market.   ** Define dd ** &** ss **: <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> ** __<span style="color: #7030a0; font-family: 'Arial','sans-serif';">Body __ **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** __<span style="color: red; font-family: 'Arial','sans-serif';">SR Analysis: DD __ **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';">Draw Dd/Ss diagram **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> // <span style="color: #00b050; font-family: 'Arial','sans-serif';">Initial dd & ss curve is DD0 and SS0 respectively. Mkt eqm is at pt A as shown in Fig 1. //<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';"> Effect on dd curve **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">Demand for air travel - normal good (define) <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">Define Recession - a period of 2 quarters of negative growth. <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · __<span style="font-family: 'Arial','sans-serif';">Recession __<span style="font-family: 'Arial','sans-serif';">: Impact on Dd? <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Arial','sans-serif';">→ dd curve shifts from <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';">Effect on mkt price & output **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">__P, ____ Q <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">Adjustment process: <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="color: #00b050; font-family: 'Arial','sans-serif';">At initial price, OPa: Surplus of air tickets -> downward pressure on price -> ↑ qty dd & ↓qty ss until eqm is once again restored, at point B, with a lower equilibrium price and quantity. <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">____TR <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Arial','sans-serif';">→ airline companies exiting the industry. <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** __<span style="color: red; font-family: 'Arial','sans-serif';">LR Analysis: SS __ **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';">Effect on SS curve (Why LR?) **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">LR: closure of these airline companies → # of airline companies ___ <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">Supply curve shifts from <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';">Effect on mkt price & o/p (wrt fig.1) **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 18pt; tab-stops: list 18.0pt; text-align: justify; text-indent: -18pt;"> · <span style="font-family: 'Arial','sans-serif';">__ P, __ Q <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** __<span style="color: red; font-family: 'Arial','sans-serif';"> Judgement on final Pe & Qe: __ **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="font-family: 'Arial','sans-serif';">Conclusion: **<span style="font-family: 'Arial','sans-serif';"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> · <span style="font-family: 'Arial','sans-serif';">Comment on any other possible effect <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;">**<span style="font-family: 'Arial Narrow','sans-serif';">b) ** **<span style="font-family: 'Arial','sans-serif';">Assess the relevance of price elasticity of demand, income elasticity of demand, cross elasticity of demand and price elasticity of supply in explaining the effects of these events on the airline industry. (15m) **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">   <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Intro: Define PED, YED, XED & PES. <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="font-family: 'Arial','sans-serif';">Body: <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">(1) **<span style="color: #c00000; font-family: 'Arial','sans-serif';">Analysis on the relevance of PED **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;">**<span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ **<span style="color: #c00000; font-family: 'Arial','sans-serif';"> **<span style="color: red; font-family: 'Arial','sans-serif';">Key assertion: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">The extent of the effect on eqm P & Q as a result of the closing down of airline companies on the industry would differ according to the PED of air travel. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">E.g. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> **<span style="color: black; font-family: 'Arial','sans-serif';">Holiday Travel: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">PED__ 1 (explain) à <span style="color: black; font-family: 'Arial','sans-serif';"> Larger availability of substitutes (cruise, rail, car), flexibility in both location & time. Highly applicable to consumers who travel for leisure purposes. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> **<span style="color: black; font-family: 'Arial','sans-serif';">Business Travel: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">PED ___1(explain) à <span style="color: black; font-family: 'Arial','sans-serif';"> necessity in both time & location, lack of close substitutes. Especially so for business men. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ <span style="color: black; font-family: 'Arial','sans-serif';">Fig 2 <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: black; font-family: 'Arial','sans-serif';">﻿ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Arial','sans-serif';"> ** <span style="color: black; font-family: 'Arial','sans-serif';">Comments on Relevance with application to context: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">Closure of some airlines à <span style="color: black; font-family: 'Arial','sans-serif';">fall in SS à <span style="color: black; font-family: 'Arial','sans-serif';">leftward shift in supply curve → ___P. ___Q <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">PED can be used to <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: red; font-family: 'Arial','sans-serif';">explain the effects of ↓SS on Pe & Qe in air travel market <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: red; font-family: 'Arial','sans-serif';">estimate the fall in qty/ no of passengers. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">For a more price inelastic demand curve: <span style="color: black; font-family: 'Arial Narrow','sans-serif';">↑ <span style="color: black; font-family: 'Arial','sans-serif';">P will be _______, ↓Q will be ________ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> **<span style="color: black; font-family: 'Arial','sans-serif';">Firm’s response: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">If dd for air travel is price elastic (holiday travel) à <span style="color: black; font-family: 'Arial','sans-serif';"> Airlines would be likely to engage in <span style="color: red; font-family: 'Arial','sans-serif';">non-price competition <span style="color: black; font-family: 'Arial','sans-serif';"> so as to gain a larger share of the market and to make its demand curve more ______________. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;">Conclusion: <span style="color: black; font-family: 'Arial','sans-serif';">PED is relevant in explaining <span style="color: red; font-family: 'Arial','sans-serif';">the effects of the airline companies closing down <span style="color: black; font-family: 'Arial','sans-serif';"> on the airline market’s eqm P & Q as well as <span style="color: red; font-family: 'Arial','sans-serif';">business strategies <span style="color: black; font-family: 'Arial','sans-serif';">of the remaining airlines in the industry. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">But, the <span style="color: red; font-family: 'Arial','sans-serif';">other changes <span style="color: black; font-family: 'Arial','sans-serif';"> suggested in the signpost (i.e. increased fear of flying & falling income) → limits usefulness and relevance of PED alone. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;">(2) **<span style="color: #c00000; font-family: 'Arial','sans-serif';">Analysis of the relevance of YED **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;">**<span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ **<span style="color: #c00000; font-family: 'Arial','sans-serif';"> **<span style="color: red; font-family: 'Arial','sans-serif';">Key assertion: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">The _______________the value of YED for air travel, the more responsive demand of the good is to a change in income, c.p. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">Air travel → luxury good (defn? value? ) → ________________↓Pe & Qe, c.p. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> **<span style="color: black; font-family: 'Arial','sans-serif';">Fig. 3 **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';">Holiday travel vs business travel: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: red; font-family: 'Arial','sans-serif';">YEDht _______ YEDbt (Why?) **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">YED: Relevant in explaining the extent of the effects of these events on the airline industry’s P & Q. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: black; font-family: 'Arial','sans-serif';">Firm’s response: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">Airlines may focus on marketing ____________flights to increase their revenue. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="line-height: normal; margin: 0cm 0cm 0pt 43.5pt; tab-stops: list 43.5pt; text-align: justify; text-indent: -25.5pt;"><span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;">Conclusion: <span style="color: black; font-family: 'Arial','sans-serif';">Highly relevant in explaining the <span style="color: red; font-family: 'Arial','sans-serif';">effects of the recession <span style="color: black; font-family: 'Arial','sans-serif';"> on market for air travel. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">Relevant in explaining strategies of remaining airlines. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;">(3) **<span style="color: #c00000; font-family: 'Arial','sans-serif';">Analysis of the relevance of the respective concepts ** <span style="color: #c00000; font-family: 'Arial','sans-serif';"> ** <span style="color: red; font-family: 'Arial','sans-serif';">Key assertion: **<span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: black; font-family: 'Arial','sans-serif';">XED is irrelevant **<span style="color: black; font-family: 'Arial','sans-serif';"> in explaining the effects of the events on P & Q- Why? <span style="color: #c00000; font-family: 'Arial','sans-serif';"> ** <span style="color: black; font-family: 'Arial','sans-serif';">Firm’s response: ** <span style="color: black; font-family: 'Arial','sans-serif';">However, XED would have an implication on the strategies adopted by the airlines. <span style="color: #c00000; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';">Value of XED between airlines increases. Why? <span style="color: #c00000; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';">→ ** <span style="color: red; font-family: 'Arial','sans-serif';">more non-price strategies **<span style="color: black; font-family: 'Arial','sans-serif';"> to ↑uniqueness & thus ↓substitutability of their services → maintain sales in response to change in Pr of their substitutes. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> **<span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Conclusion: <span style="font-family: 'Arial','sans-serif';">Relevant in explaing the effect of the events on the strategies of the remaing airlines. <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> <span style="font-family: 'Arial','sans-serif';">(4) ** Analysis of the relevance of PES ** <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> **<span style="color: red; font-family: 'Arial','sans-serif';">Key assertion: ** <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Arial','sans-serif';">The ___________________the values of PES, the more responsive suppliers are to changes in P of the good. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: black; font-family: 'Times New Roman','serif'; font-size: 12pt;">Fig 4 <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> ** <span style="color: black; font-family: 'Arial','sans-serif';">Application to context: ** ** <span style="color: black; font-family: 'Arial','sans-serif';">SR: PES < 1 (Why?) ** <span style="color: black; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';">When dd falls due to recession and fear of flying, ↓ Pe will be ___________ but ↓eqm no. of passengers will be  <span style="color: black; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';"> ** <span style="color: black; font-family: 'Arial','sans-serif';">LR: PES > 1 ** <span style="color: red; font-family: 'Arial','sans-serif';">All factors of production can be changed <span style="color: black; font-family: 'Arial','sans-serif';">. <span style="color: black; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';">↓Dd will lead to **//more than proportionate fall in Qe//** **//<span style="color: #00b050; font-family: 'Arial','sans-serif';">from OQ to OQe //****//<span style="color: black; font-family: 'Arial','sans-serif';"> but a less than proportionate fall in Pe //****//<span style="color: #00b050; font-family: 'Arial','sans-serif';">fr OP to OPe. //**<span style="color: black; font-family: 'Arial','sans-serif';"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt;"> <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">Conclusion: <span style="color: black; font-family: 'Arial','sans-serif';">Relevant in explaing the <span style="color: red; font-family: 'Arial','sans-serif';">effects of the recession and the fear of flying <span style="color: black; font-family: 'Arial','sans-serif';"> on the airline mkt. <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> <span style="color: black; font-family: 'Arial','sans-serif';">﻿ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> <span style="color: #c00000; font-family: 'Arial','sans-serif';">﻿ <span style="color: #c00000; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;"> ** <span style="color: #c00000; font-family: 'Arial','sans-serif'; font-size: 12pt; line-height: 115%;">Synthesis/ Conclusion **<span style="color: #c00000; font-family: 'Arial','sans-serif';"> <span style="color: #c00000; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';">PED, YED and PES are definitely relevant in explaining the effects on the events on the airline industry. XED? <span style="color: #c00000; font-family: 'Arial','sans-serif';"> <span style="color: black; font-family: 'Arial','sans-serif';">However, the various elasticity concepts have limitations which reduced their usefulness. <span style="color: #c00000; font-family: 'Arial','sans-serif';">
 * <span style="font-family: 'Arial','sans-serif'; font-size: 12pt; line-height: 115%;">The terrorist attack on New York on 11 September 2001 caused a worldwide recession and an increased fear of flying, both of which severely affected the demand for travel by air. This led to the closure of the major airlines in the world. **<span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 115%;">
 * 1) <span style="color: black; line-height: normal; 0cm text-align: justify; margin: 0cm 0cm 0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;">**<span style="font-family: 'Arial','sans-serif';">Inaccuracy of the data **** à ****<span style="font-family: 'Arial','sans-serif';"> collection & sampling errors: **
 * 2) <span style="color: black; line-height: normal; 0cm text-align: justify; margin: 0cm 0cm 0pt; mso-list: l0 level1 lfo1; tab-stops: list 36.0pt;">**<span style="font-family: 'Arial','sans-serif';">Assumption of ceteris paribus →do not apply in the real world.  **