LCBB5003 - Management Economics: Demand, Elasticity & BA Analysis

This report examines the demand and elasticity of British Airways' flight services within the framework of management economics. It identifies factors influencing demand, such as price of substitutes, consumer income, and consumer preferences, and analyzes how these factors affect market equilibrium. The report also delves into the elasticity of demand, particularly focusing on substitution and income effects, highlighting how changes in price and consumer income impact the demand for British Airways flights. The analysis concludes that while flights are luxury goods, demand is still sensitive to income levels and the availability of substitutes, affecting the airline's profitability and market positioning. Desklib provides access to similar solved assignments and past papers for students.

Management
Economics

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
Describe the business and its main product or service................................................................3
TASK 2............................................................................................................................................4
Identify the demand and market equilibrium which influenced the demand of their products.. 4
TASK 3 ...........................................................................................................................................6
Indicate the elasticity or more elasticity of demand for the given factors..................................6
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Economics is the study of scarcity of resource & its implication to their production of
resources, growth of operations and welfare in time(Laney, 2020).It is other complex issues of
major concern to the society. Management economics emphasis on problem solving and the
certain decisions which is taken by applying principles and theories of economics. It is the main
consideration of the firms which is having the certain affects on the overall profitability of the
company(Asian Chaves and et. al.,2020). British Airways is the flag carrier airlines in the United
Kingdom. It is the second largest UK based airlines and its headquarter is in London England.
Britishers are offering airlines services which belongs to the luxury products ans there is no
change with the change in the prices of the airlines flights due to certain aspects can be vary
irrespective of its demand. This report will evaluate the demand & elasticity of demand in the
large market in consideration to its product in the market place. Furthermore, It will access the
certain pricing policy which are helpful for the growth of the organisation.
TASK 1
Describe the business and its main product or service.
British Airways is the flag carrier airlines of the UK and their headquarter is in London.
British Airways is the airline is the second largest UK based carrier which is based on fleet size
& passengers carried behind easyJet (Dryden, Khodjamirian and Padilla, 2020). They are
operating their business world-wide with more than 183 destination. They are offering business
classes, food and beverage, family travel etc. which is ensuring the better services to their
potential customers.
Chosen Product:
The chosen good for the organisation is the flights ans these are the high value goods of
the organisation which are present only at high prices (Hawkins, 2021). It involves the demand
for such goods is based on the income aspects of the income of the consumer as they are offering
g the tickets at the higher prices which implied no change in the demand due to change in the
prices of the given goods in the field of the market place.
Explantation of choosing that product:
Fights of British Airways is known for their better services and they belong to quality and
high value services which is also elasticity of demand for their products and services which is

also effecting the demand of the flights of the airways. This is majorly managed by the high
income as they are having higher interest which want to show their status in the society.
TASK 2
Identify the demand ^ market equilibrium that influenced the demand of their products.
Demand refers to the desire of the person which is showing the desire of the consumer
for buying the certain goods & services and also having the capabilities to pay the given prices of
the commodity at the point of time (Jahromi and Heidary,2021). There is no change in thes other
factors. As per the Law of demand termed that there is inverse relationship between the cost &
the demand of the given goods, as there is increase in the prices of the product then it would
leads to decrease the overall demand of the given goods in the large market. In context to British
Airways, Flights are the luxury goods and this implied no change in the demand of these services
due to change in its prices as there is large number of buyer who are willing to buy the tickets
even at the high prices also. This comes under the expectation of law of demand and here this
fails as there is no change with the change in the prices of the commodities as per the prices.
Equilibrium is the phenomena where the market demand is equal to the supply as there
is no such change in the prices of the goods in the large market, no change in to taste &
preferences of customer, expectation of the customers. In simple words, when the demand of the
customer is meeting the supply in the large market (Laney, 2020). For instance, when the
demand of certain products decreases due to rise in the overall price of the commodity. Where as
when there is down fall in the demand of certain goods and services then it implies due to rise in
the prices in the large market which implied to have the better products in the market.
Illustration 1: Demand curve, 2021

In consideration to British Airways, they are operating in the airline services as there is no
variations with the change in the prices of goods and services in the large market. It is the aspects
which implies change in the overall demand of the commodity and certain factors which affects
the demand of the flight services are given:
 Price of substitutes-These are the goods which can be used in place of other goods as
these are giving same level of satisfaction. There are various airlines industry such as
Eastern Airways which can be the substitute for British airways as they are giving same
level of satisfaction and the demand of such goods in elastic which is having the many
options to use them(Madden and Dobbs, 2020).
 Price of complements- It is defines as the product which implies or considered as the
conjunction of another product or services. Such goods can be consumed together and
catering services is the complementary goods for air-planes as when the demand for the
tickets increases then it leads to have more demand of food and beverage the so it is
having the direct impact on the demand of the flights. As per this, it shows that increases
or decrease in the price of goods implied in the maintenance of aeroplanes. Where as it
where as, this is price of the complementary goods impact the overall demand of the
current products (Unnevehr, Caswell and Kinsey, 2021).
 Consumer income- It is defines as the salary of the person in which they get any sort of
work or job. In consideration to airlines services, These are having demand elasticity of
Illustration 2: Equilibrium diagram, 2021

income greater than the utility which is expected to be positively correlated. It implies
change in demand of the services with change in the income of the buyer. The buyers
will buy higher term of the products. In relation to the British Airways, they are having
an effective and efficient sections in the field of the market place due to which all the
things that can be maintained as suitably. Demand of flights is majorly effected by the
income of the buyer as rise in the income level of the consumer impact the overall
demand of the flights in the large market.
 Consumer taste and preference- These are the liking or the preferences of the customer
which is having major consideration of market trends as Increase in the demand of the
goods due to change in the taste and preferences of the customer. On other hand, when
the consumer is not liking the products, it implies change in the demand and leads to
reduce the overall demand of the given goods in the large market. As in relation to the
British Airways, when the traveller are more like to travel by air plane and then it leads to
increase in the total demand of the flights in the UK and business can maximise higher
amount of the profit. On the other hand, it leads to decrease the demand of the flights
when the traveller in not liking their services in the market.
 Demographics- It is the aspects which implied among the number of potential buyers
that are loyal to their brand due to their set perception for buying certain goods and
services in the large market(Hawkins, 2021). Upper class or high profile people are
considered in this category due to having good buying capacity for certain goods and
services which could leads to have better results in the target market and implies to have
the certain consideration that is ensuring increase in the demand of certain goods and
services in the large market. In context to British Airways, they have targeted citizens
which are involving in primary market of ABC1 which is considering only high class
services provided by British Airways only. They are becoming more diverse in setting
their customer base.
From the above discussion, it is analysed that there is major influence with the change in
the income level of the buyer reflect the demand of the airlines services in the large market.
When the prices of the tickets increases then there is downfall in the overall demand of the
flights and customer will not reach to get the better products. As per the law of demand, this
statement is right as there is effect with the change in the prices of the tickets in their demand. In

consideration to British Airways, they are providing quality of the services as there is an impact
of price in the demand of the given goods of the particular product which is completely reflects
upon the level of their income.
TASK 3
Indicate the elasticity or more elasticity of demand for the given aspects.
Elasticity of demand is defines as the variation in the consumption of the products with
the change in the amount of the given products due to change in the certain factors which is
impacting overall demand of the commodity in the target market (Hawkins, 2021).
Price Elasticity of Demand= % change in Quantity demand / % change in price
It is usually contains the certain aspects in which it implies change in the demand of the
given goods with the change in the prices of the commodity. There are certain aspects in which
there is no such change in the prices due to change in the various factors and they are just
constant in all the way. These are the goods that more elastic as due to rise and it will lead to
decrease in the income level of the consumer and have impact on the sustainable changes in the
demand curve in the prices which is also called as the Elastic. There are some of the aspects that
are being explained in consideration of demand elasticity that are as follows -
 Substitution effects: These are the aspects which is having the decrease in the sale of the
commodity in which the price of the given goods is tends downfall as the buyer will
analyse purchase cheaper products and the existing products is hiking in the prices of the
goods(Asian Chaves and et. al.,2020). In relation to British Airways, they are operating
their services by offering tickets as there is change in the demand of the tickets due to
change in its prices. When the prices of the tickets decrease then the demand for tickets
also rises as the customer will love to have the affordable services.
As flights of British Airways is the basic services which can be afforded by the individual
who is having high status in the society and they are also having high interest in travelling by
airways. There is dynamical variation as per to the change in the prices of the goods in the field
of the market place. Traveller is having the purchasing power on pre-booking orders. Thus, the
demand of their products is elastic by those changes in the income level it will implicit to have
change in the demand of the flights.

 Income Effects: It is the earning of the people which is being eared by getting some sort
of work or job. It shows the change in the demand of the particular goods due to change
in its prices and vice-versa. This is generally depends upon the prices of the commodity
which affects the real income of the buyer. This also implies in the better choices of the
customer so that they can have the better product backed with their sufficient income
level. This is the compensation of the person which is being generated by doing some
work so that they can have better life As the every individual is having the consideration
of having effective outcome as those aspects is completely rely on the income level of the
buyer so that they can purchase the quality of the services by rising in their income level
as globally. On other hand, in context to British Airways, their income of the consumer
will get rise and it will lead to rise in the overall demand in the target market, in this case
the demand for flights is elastic as this can be changed with the variations in the income
of the purchasers.
What is the pricing policy that business employs & why?
Companies are using certain pricing policy as there is change in the certain market
policies impacts the overall market scenario which do not stick to the specific one in order to
have more profits. There are some aspects which reflects the overall demand of the given goods
in the particular market and implied in the change in the pricing polices & the cost of location,
requirement of target market or the income level of the buyer. This also says that higher
profitability in the organisation and there are certain type of pricing policy which is use by the
organisations are given below:
 Geographical pricing: It is the pricing policy that is being used by the company as there
are different market locations which is serving the large market within the easy
approach(Abdurakhmanov, 2020). This also usually cover the local market which can
decrease the transportation cost. This also leads to set the different pricing polices as per
the commodities. This implied in the setting the certain prices of goods as per the market
demand by which they an ensure higher profits and revenue for British Airways so that
they can rightly act in their various functional areas.
 Price discount and allowance: These are the certain prices which is being given to the
customer as the reward in respect of bulk buying, early payments and off-season buying
which also includes the discount rate that is offered to the customers as this also includes

the bulk buying. With the helps of this, British Airways can rightly attract the large group
of customer in order to have better results in it.
CONCLUSION
From the above discussion that demand and supply are the two important aspects which
contribute to the focuses on the demand supply of British Airways product and not the UK
economy of British airways. This respective report is based on the British Airways in which the
law of demand fails and there is not such change with the change in the prices of the flights
(Unnevehr,, Caswell, and Kinsey, 2021). Income of the buyer is the main aspects which also
impact the demand & the supply of the goods. There are different pricing approach that is being
used by the venture and they must use the pricing discount which implies helps in the different
type of gifts and vouchers which is being purchased in the given goods. This helps in capturing
the large customer base so that they can suitably set their targets in the field of the market place
for British Airways.

REFERENCES
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