For example:
Air Deccan
With the economy growing at a rate of about 8%, while the business environment with infectious optimism. The spill over can also be seen in aviation. With just under 14 million passengers flying the domestic sector in 2003, this figure now stands at nearly 28 billion domestic market is growing at almost 50%.
GR Gopinath, the man who pioneered aviation weak in the face in India, firstly looking at this opportunity. With a new concept of luxury not low fares airline, which broke into the market 3 years and today enjoys a market share of 21.2%.
Today low cost has about 4 great players namely, Air Deccan, Spice Jet, Go Air and Paramount holding a market share of around 35% in 2006 and expects to cover about 50% in 2007.
Demand for airline tickets Qa = f (Pa., O, P, T)
Prices of inputs (Pa.) - are the main influences on demand. In sharp drop in the rate prices, has led to an explosion of the aviation sector, with an estimate of about 56 million people flying in 2010
Income (Y) - Increase revenue provides the ability to buy and increasingly income people are increasingly airborne.
Price alternates (AP) - With the price of a ticket rail and air transport to reach the same level, people resort to airlines.
Price elasticity of demand for air fare
From long-haul home affairs - 1.120
Long internal mail leisure - 1.520
In the short / medium-haul domestic firms - 1390
In the short / medium-haul domestic leisure - 0.730
As the demand for aircraft is very elastic. Air Deccan with its offer of low prices (as low as Rs500 and RS1) very well executed.
Income elasticity --
From long-haul home affairs - 0.840
Long internal mail leisure - 2.169
In the short / medium-haul domestic firms - 0807
In the short / medium-haul domestic leisure - 2.049
It was considered more revenue and more particularly the entertainment industry has a very positive response to the request of airline ticket. With the middle class and successfully growing purchasing power has led to an increase in the number of passengers.
Cross Elasticity Of Demand Applied to Business and Consumers
Lets examines Happy Pet Clinic, a local veterinary clinic in the cross-elasticity how they affect businesses and consumers.
Vet Professional brand pet food is the exclusive brand of pet food led to the Happy Pet Clinic. This pet food is considered a? Premium? brand and competes with other high-end pet foods, but is only available in veterinary offices. The recent recall of more than 100 brands of pet food that many clients at the clinic to find? Insurance? Brands. Due to the high quality of ingredients exclusively from americas North, the clinic felt comfortable in recommending the food to customers has fueled one of the more than 100 brands of food and were recalled in search of a safe brand of food - their dogs and cats. At the same time, the cost of Professionals Make a Happy Pet Vet Clinic has increased, due to rising gas prices causing increased transportation costs.
Price elasticity of demand expresses the relationship between the price of a product and demand for that product. What happened to the demand for professionals Vet brand sales if the clinic raises the price of? While some existing customers can not buy food for pets in the new price, other customers will continue or even join in the purchase, since it is one of the few pet foods are not affected by the withdrawal of petfood. To calculate the price elasticity of demand for professionals Vet Brand is estimated that sales would be reduced from 98 bags sold per month to 90 bags sold per month:
Original Price = $ 15 bag (P1)
New Price = $ 17 bag (P2)
Quantity requested the former Price = 98 (Q1)
Quantity requested the New Price = 90 (Q2)
Price elasticity of demand is the percentage change in the amount requested, divided by the percentage change in sound? S price.
PED = [(Q1 - Q2) / Q1] x 100) / [(Q1 - Q2) / P1] x 100
PED = [(98? 90) / 98] x 100) / [(15? 17) / 15] x 100
PED = (8.16) / (-13.33) = - 0,612
If DEP> 1, then demand is elastic, or sensitive to price changes, if DEP = 1, then demand is elastic unit, or changes in the proportion, if DEP <1, demand is inelastic, or not sensitive to price changes. In this case, PED = 0612, so if our estimates are correct, changes in price will not affect the very strong demand.
Each year the clinic makes an analysis of their operating costs and the competing clinics in the loading area, and every year to increase its prices for veterinary examination conservative amount. They are reluctant to raise their prices even more, because they fear that this will reduce the demand for Happy Pet Clinic services, and increase demand for less expensive examinations to Jolly Pet Clinic two blocks away. People still need to examine their pets and clinics, both of which are located near each other, some people are easily willing to replace Jolly Pet Clinic Happy Pet Clinic.
Using the Red price elasticity of demand change in the demand for Happy Pet Clinic services can be quantified. Cross-price elasticity of demand measures the sensitivity of a quantity demanded change in the price of another asset. To calculate the cross-price elasticity of demand is estimated that 5% increase in the cost of Happy Pet Clinic examinations would increase demand for examinations at Jolly Pet Clinic by 10%.
Cross-price elasticity of demand is the percent change in demand for a commodity divided by the percentage change in the price of another good.
D% demand at Jolly Pet Clinic = 10%
D% variation in the price of a Happy Pet Clinic = 5%
HPAC + 2 =
While the result of this calculation is a positive number, then the products are substitutes. If the calculation produces a negative number, then supplements. In this case, with the cross-price elasticity of demand giving + 2, plus the cost of Happy Pet Clinic examinations increases, more customers substitute Jolly Pet Clinic services for theirs.