A change in demand should not be confused with a change in quantity demanded. A change in demand is a shift in the entire demand curve. A change in quantity demanded is the movement from one point to another point "from one price-quantity combination to another "on a fixed demand curve. .
The last thing I wanted to talk about with demand is elastic demand and inelastic demand. Economists, forecasters, and airline price analysts measure how responsive, or sensitive, passengers are to a change in the price by elasticity of demand. Demand is elastic if a given percentage change in price results in a larger percentage change in passengers carried. Demand is inelastic if a given percentage change in price is accompanied by a relatively smaller change in the number of passengers carried. Pricing analysts and others measure the degree of elasticity or inelasticity by the elasticity coefficient. The determinants of elasticity in the airline industry are competition, distance, business versus pleasure, and time. .
I believe the passenger fare structure is one of the most important factors when discussing airline pricing and demand. The fare structure consists of normal fares, common fares, joint fares, and promotional fares. The responsibility of airline pricing analysts appears to be to monitor, analyze, and respond to hundreds, sometimes thousands, of daily fare changes implemented by competitor airlines, and routinely develop pricing initiatives to strengthen and fortify their company's position in the marketplace. The pricing process can be characterized as being heavily dependent on automation, having many different fare levels subject to change as a competitive response. .
Applying normal pricing strategies and objectives to the airlines is complicated, because carriers don't charge only one price for their services. They offer an array of fares designed to appeal to both price-sensitive leisure travelers and less price-sensitive business travelers.
