Airlines Economics - Demand
Air Transportation is an intermediate good
- Derived demand
- Journey is merely a means to fulfill another need
- Sensitive to changes
- Price elasticity & income elasticity of demand
Gravity Models
- Total demand on the basis of population, distance and income
- Dummy or slack variables to include specific parameters
- Problem of Multi-collinearity
- Impossible to observe changes in one of the variables without simultaneous changes in one or all of the others