Economic Profile of the Airline IndustryAirlines use a formula combining their yield and inventory costs to determine ticket prices. While it is imperative to focus on the idea of ​​being profitable, the emphasis is on maximizing the cost of revenue generated from flights. An important factor that encourages an increase in the cost of tickets is related to the fact that a customer orders a ticket close to the departure date, defines this as a risk factor because they have to make up for all unsold seats. A high percentage of revenue is spent on overhead costs such as fuel and labor. When a ticket price is higher with one airline than with another, the customer interprets this as an excessive cost. Demand is greatly affected by external market conditions such as taxes; By law, it is legal to add taxes to airline tickets since they are considered a luxury good (Button, 2005). The price elasticity of demand in the airline sector depends on the number of competitors present on this route. For example, on a busy route like New York to Los Angeles, the price elasticity of airline demand is high, passengers may switch from one airline to another (Econ FAQs, 2007). They can substitute low-cost airlines for higher-cost airlines, making price elasticity high. In contrast, non-competitive routes have inelastic demand. The article cited below gives the example of a trip between Charleston, West Virginia and Atlanta where the fare is $1,000 (Jerram, 1998). In general, it is difficult to replace air transport. Other modes of transportation, such as roads and railways, take relatively longer to move. So if a person has to travel, he must use the airlines. However, if there is a ...... middle of paper ...... con FAQ. (2007). Air Transport Association, accessed January 15, 2008 at http://www.airlines.org/economys/specialtopics/Econ+FAQs.htmFRBSF. (2002). Economic letter. Retrieved January 21, 2008 from FRBSF: http://www.frbsf.org/publications/economys/letter/2002/el2002-01.pdf Jerram, R. (1998). The airline industry. Retrieved February 5, 2008 from the London School of Economics and Political Science: http://www.mega.nu/ampp/PEGB/chap11.htmRiley, G. (2006), Externalities - Government Policy Options, accessed February 12, 2008 . 2008 from: http://tutor2u.net/economys/revision-notes/a2-micro-externalities-policy-options.htmlRecent policy initiatives aimed at increasing low wages. (2004). Retrieved February 10, 2008 from ACORN.ORG: https://www.acorn.org/index.php?id=203Zabin, C. (1999). Living wage at the Port of Oakland. Retrieved February 14, 2008 from http://ww