Economics Chapter Two

Airlines begin cutting fares for holiday travel

Link: http://www.cnn.com/2008/TRAVEL/10/30/airlines.holiday.fares.ap/index.html

Summary

This article talks about major U.S airlines cutting many fares for the upcoming Thanksgiving and Christmas seasons. Many airlines see price-cutting as necessary in the face of a recession economy that could affect both leisure and business travel. Northwest Airlines started the rush Tuesday night with a broad holiday fare sale, and most other major carriers matched the prices the next day, Wednesday. The cuts ranged up to 25 percent off the previous price for tickets that must be bought 21 or 30 days ahead of travel. Carriers would rather not be cutting prices now, but demand may be slowing faster than airlines can reduce the supply of available seats. In most cases, the prices are good until at least late November.

Connections

The connection that I found between this article and the text in chapter 2 is the concept of supply and demand. Due to the recession economy we have today, many businesses are cutting supplies to once again increase the demand for products or services. Moreover, consumer’s income has declined or affected due to the economy; therefore they will no longer spend money on travels or vacations. This will once again lower the demand for airlines and carriers. Prices for products or services will only increase if there’s a high demand and limited supply; however, the demands for airlines are at its worst compare to a few months back.

Reflection

I agree to what the airlines and carriers are doing. I believe that cutting the price will attract more consumers to travel during holidays and increase the demand. As we all know, the economy is in a complete recession. We've got to be prepared for a weak economy and weaker demand. Many other businesses are also cutting price due to the low demand, such as oil and etc. This way we can slowly bring the economy back up and balance out the supply and demand factors.