The Economics of Airline Tickets: Are They Elastic or Inelastic?
Flying has become an essential part of modern life. For some, it’s for business, and for others, it’s for leisure or personal reasons. But regardless of the purpose, air travel involves navigating a complex web of factors that determine the cost of flying. This begs the question: what makes airline ticket prices rise or fall? Are they elastic or inelastic?
To answer this question, we need to first understand what the terms ‘elastic’ and ‘inelastic’ mean. Elasticity is a measure of how much a change in price affects demand. Inelasticity refers to the opposite, where a change in price has little to no effect on demand.
So, are airline tickets elastic or inelastic? The answer is not straightforward. Several factors affect the elasticity of airline ticket prices, which we will explore in this article.
Factors that Affect Ticket Prices Elasticity
1. Time of purchase
The most crucial factor affecting the elasticity of airline ticket prices is the time of purchase. Suppose you’re booking a last-minute flight or during peak travel season. In that case, chances are you’ll end up paying a premium price. Conversely, buying your ticket months in advance can result in significant savings. In short, the earlier you book, the lower your ticket’s cost, making airline tickets relatively elastic.
2. Brand loyalty
Many people are loyal to certain brands, and this applies to airlines as well. For example, frequent fliers who are members of specific airline reward programs may be more likely to stick to that airline regardless of the cost. In such a case, the airline’s ticket price would be more inelastic.
3. Route
Airline tickets’ elasticity also depends on the specific routes that you’re traveling. Popular routes like New York to Los Angeles or London to Paris tend to have less elasticity than less-traveled routes. For these more sought-after routes, airlines can charge higher fares because people are willing to pay a premium for the convenience of not having layovers or longer travel times.
4. Competition
Competition is another significant factor in determining the elasticity of airline ticket prices. In markets with stiff competition, airlines tend to keep their prices lower, making them more elastic. Conversely, in markets with little competition, airlines can charge whatever they want, resulting in less elasticity.
Examples of Elastic and Inelastic Airline Ticket Prices
Let’s take a closer look at some real-world examples of elastic and inelastic airline ticket prices.
Elastic Airline Ticket Prices:
Suppose you’re flying from New York to Paris. In that case, you’ll most likely find many airlines offering flights, making this route highly competitive. As a result, airlines tend to offer more affordable prices, making airline ticket prices relatively elastic.
Inelastic Airline Ticket Prices:
Suppose you’re flying from a remote location in Alaska to visit family in Texas. In that case, only one or two airlines may offer flights, resulting in less competition. As a result, airlines may charge higher prices as they are less elastic than routes with more competition.
Conclusion
Determining whether airline tickets are elastic or inelastic depends on several factors. The time of purchase, brand loyalty, route, and competition can all greatly influence ticket pricing. So, the next time you’re booking a flight, consider these factors to secure the best deal possible. Always remember to book in advance and compare prices across different airlines to ensure you’re getting the best deal possible.
