--%>
Assignment Help - homework help

Market Economy

Explain the statement "Hypothes is the basic short run and long run behaviors of the airline industry in a market economy".

E

Expert

Verified

Short run is the period where a fixed factor of production remains constant. The output or service can go high in small measures only. Entrepreneur cannot alter the fixed factors of production to his advantage. Investment and manpower cannot get increase in short period of time. Both business conditions and environment hamper business man to aim for greater production or service level. The average cost will be at competitive level with small output and given set of production factors. Hence any decision a business man takes in the short run will give only small increase in output or service at a given price. Airline business can also face similar situation where it cannot increase the service in short run. The tendency of the airline business in the short run is not to disturb the current level price as it can give only limited service without any expansion. Very often, in the short run, the business can operate only in short routes and destinations. It cannot increase the fleet of operations and cannot fly to longer destinations.

Long run decision and long run period denotes the situation where a business man can conveniently alter the factors of production to his advantage. Capital budgeting decisions are possible only in the long run. Airline business firm can increase the fleet of operation and travel destinations only in the long run. Passengers can get lot of benefit in the long run period. Price concessions and cost reduction will be possible in the long run. Passenger traffic and passenger amenities will be possible only in long run period.  Innovation and novelty will be the unique feature in the long run situation. Sustainable development in the airline business is possible with the support of government policy. Government can also help both private and state airliners in the subsidies and financial assistance. It is hypothesized that airlines charge passenger fees direct to their customers. Protection of competition is essential to secure sustainable development.

   Related Questions in Macroeconomics

  • Q : Problem on equivalent Consumer Surplus

    Tom reimburses $5.00 for a ticket to see a present hit movie. If Tom was willing to reimburse up to $7.00 for that ticket, his consumer surplus equals: (1) $5.00 (2) $2.00 (3) $7.00 (4) Tom does not receive any consumer surplus as he purchased the ticket.

  • Q : Employment Effect Fiscal policy

    Fiscal policy measures used for achieving full-employment level of output and price include increase in the government expenditure and cut in tax rates. A cut in tax rates eliminates only the adverse effect of high tax rates, whereas an increase in government expendit

    		•
  • Q : When price of demand curve modified

    Whenever the price of a good all along a demand curve is modified since of a change in supply, the substitution effect is the modification in purchases of a good which result from a change merely in: (1) The associative price of that good. (2) Consumer tastes and prio

    		•
  • Q : Value added technique for national

    What is the alternative name of value added technique of estimating national income? The alternative name of value added technique of estimating national income is production method.

    		•
  • Q : Objective of government Budget Give

    Give some objective of government Budget. Answer: The objectives which are pursued by government via the budget are as follows: A) To attain economic growth. B) To decrease in equalities in income and wealth.

    		•
  • Q : What is Equilibrium What do you mean by

    What do you mean by the term Equilibrium? Also state its proper definition.

    		•
  • Q : Business cycle What is meant by the

    What is meant by the term business cycle as described by economists?

    		•
  • Q : Reallocation of resources through budget

    Reallocation of resources: In case, the market economy fails or does not attain the desired social objectives, the government has to interfere via budget and reallocate resources accordingly. Through its budgetary

    		•
  • Q : Control of Inflation Economists agree

    Economists agree that inflation beyond a moderate rate is undesirable as it can often prove disastrous and therefore, it must be kept under control. Economists agree also that an appropriate mix of fiscal and monetary policies can be helpful in controlling inflation.

    		•
  • Q : Net revenue when price increases Net

    Net revenue for Macho Man fake mustaches increases after the price raised from $5 to $7, pointing that demand faced by Macho Man was: (i) Relatively elastic. (ii) Relatively inelastic. (iii) Unitarily elastic. (iv) Perfectly inelastic. (v) Perfectly e

    		•