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In this report I will analysis the price and income elasticity of Ryanair and make a recommendation about the strategy of Ryanair towards further price cuts taking information from the aviation monthly

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Introduction

Terms of Reference: - The regional executive Victoria Graham at Bournemouth Airport has recently employed me as an economic advisor for Ryanair. I have been asked to prepare a report for Victoria's board meeting in December. In this report I will analysis the price and income elasticity of Ryanair and make a recommendation about the strategy of Ryanair towards further price cuts taking information from the aviation monthly. Also I will give outline of criteria used to refer take-overs to the Competition Commission and explaining the possibility of a referral being made on the proposal to take-over Buzz airlines. Finally I will provide an explanation of the economies of scale interconnection with Ryan Air and providing a statement about Ryan Air possibility of moving their maintenance operations to Bournemouth airport. Procedure or Method: - This report will be compiled from a range of different sources. The Internet has provided me with most of my information. This is where I found definitions and terminology of the topic from economic and teaching websites. However some of the information I have researched from the University Library at Bournemouth University. As the task in this report are spilt onto three different sections I will spilt the report into three parts. ...read more.

Middle

The Income Elasticity of Demand for short breaks and holiday flights has risen to 3.7. Recommendation on Pricing Policy referred to data: - Knowledge of the price elasticity of demand for a product enables a firm to predict changes in its total revenue following a change in price. Thus by keeping airline prices down to a bare minimum or at least just below their competitors. This would then allow Ryanair to have that edge in the market for one of the biggest low cost airlines in UK. Task 2: - Competition Commission: - The competition commission was established by the Competition Act 1998 and replaced the Monopolies and Mergers Commission (MMC) on 1 April 1999. The Competition Commission carries out inquiries into companies referred to it by the other UK competition authorities Office Fair Trading and other Regulators. The Competition Commission conducts in-depth inquiries into merger plans between companies, markets and the regulation of the major industries. Examples of the kind of conduct that may constitute an abuse include: * The imposition of unfair prices; * Limiting production, markets or technical developments to the prejudice of consumers; * Applying dissimilar conditions to equivalent transactions with other trading parties, thus placing them at a competitive disadvantage; * Making contracts subject to the acceptance of other obligations, which are irrelevant to the subject matter of the contract. ...read more.

Conclusion

No change Elastic Price fall Price increase Increase Fall Cross-elasticity of demand "The responsiveness of the change in the quantity demanded of product A to a change in the price of product B." (See page(s) 145) Elastic demand "Quantity demanded that is quite responsive to a change in price." (See page(s) 122) Elasticity coefficient "A number that measures the responsiveness of quantity demanded to a change in price." (See page(s) 121) Elasticity of supply "The responsiveness of quantity supplied to a change in price." (See page(s) 139) Income elasticity "The responsiveness of quantity demanded to a change in income." (See page(s) 143) Inelastic demand "Quantity demanded that is not very responsive to a change in price." (See page(s) 121) Price elasticity of demand "The responsiveness of quantity demanded to a change in price." (See page(s) 120) Total revenue "The total amount of income a firm receives from its sales; formally, it is price multiplied by the quantity of the product sold." (See page(s) 120) Unitary elasticity "The point where the elasticity coefficient is equal to 1, that is, where the percentage change in quantity is exactly equal to the percentage change in price." (See page(s) 129) Income Elasticity: The table below summarises the different values of income elasticity of demand. ...read more.

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