Ryanair Microeconomic Report: Demand, Supply, Elasticity Analysis

This report provides a comprehensive review of Ryanair's microeconomic strategies, focusing on demand, supply, and elasticity. It begins with an overview of microeconomic principles and their relevance to business entities, particularly in understanding market dynamics. The analysis includes a re...Read More

Review of an article and to
expand on the aspects of
microeconomic theory

Table of content
 INTRODUCTION
 Article review
 Elasticity
 Law of demand
 Law of supply
 CONCLUSION

INTRODUCTION
 Micro economic is a scale of economic theory that can empower and favour the business entity for
enhancing the individual level of potential and capability as a business venture.
 The role of the micro economic is to understand the reality of market and guide the company to formulate
the best and advanced level of practices and approaches that can support the best form of overall growth
and development for the business enterprises.
 This presentation is based on the case study of Ryan Air Company.
 Company was founded in the year 1984.
 Company belongs to airline sector that can empower the people to facilitate through the airline services at
a global level.
 The project’s aim is to understand about the different factors of micro economics and aspects which can
assist the company to follow the business operations of best level which can meet the overall business
objectives.

Article review
The article depicted about the Ryanair Company sales and its potential changes.
This certainly shows about how the pricing related strategies of company could change and influence the sales of the
business entity.
The company fares are expected to fall that could also allowed the company to attract new potential customers
associated with the market along with the existing customer base.
In the season of winter fares are expected to fall down by 7%.
The impact of this fares fallen down is the total expected passengers are now more in number that are travelling with
the airlines of company.
The impact of this is such that the company’s profitability could also increase due to the reduced fares that could
attract to the potential customer base in market.
This is economics basic nature when the prices come down this certainly increases the demand of product in
market.
The previous expectations related tp air fares fall was 2% but the decline was reported as 7%.

Elasticity
 This is a core concept belong to the micro economics.
 This is a concept that clearly demonstrates that in case a price of one commodity get increases
than this would certain affect positively over the demand of other respective alternative
options in market.
 The concept of elasticity is very crucial.
 This concept of micro economic clearly reflect that price of the product is a driver that
certainly influence supply and demand of product in respective market.
 This is essential in regards to the business venture to take a support of this concept in respect
to drive the overall demand of product in the market.
 Price Elasticity of demand clearly state that in case the price of one product increases this
would certainly reduce the overall market demand of the same product.
 In case of the price of the product decreases this would certainly boost up the overall market
demand of the same product.
 Micro economic has clearly indicated that in case the business entity is looking forward to
increase the demand of product in market than it has to certainly decrease the price of its
product in market.

Law of demand
The law of demand says that factors being constant, price and
demanded quantity of good and service and goods are related in inverse
proportion with each other.
 As the product price rises, product’s demand will fall.
The law of demand gives explanation about consumer choice behavior
when price change.
Consumers buy less of a product if they find the price increasing and
thus demand for good subsides.
This is the natural behavior of consumer choice.
It occurs when a consumer realise that if a product is pricey and
unnecessary, they can do without it.
This is often referred to as a situation of decreasing marginal utility.

Movement along curve of demand

Continued
The graph depicts the movement of the demand curve.
When the price of a commodity rises from P3 to P2, the demand
for that commodity falls from Q3 to Q2, then back to Q3 and so
on.
The demand curve depicts the total quantity demanded at each
price point along the market's consumers.
 The movement of the demand curve reflects the price change,
but not by self-increasing or diminishing demand.
Demand fluctuates in magnitude and shape in response to
changes in consumer preferences, income, and economic goods,
but not in response to price changes.

Change in demand curve
It is vital to understand the difference between the concepts of quantity and
demand in economics.
 Demand depicts the relationship between a consumer's wants and the number of
units in a given quantity of economic items.
The term "demand change" refers to a movement in the graph of consumers' wants
and requirements in terms of available resources, as well as a change in the position
or form of the curve.
Demanded quantity, on the other hand, is a reference to a point on the horizontal
axis.
The term "change in demanded quantity" refers to movement across the demand
curve as a result of price changes.
 Both ideas are sometimes confused, but there is a distinction to be made: rising or
falling prices do not indicate a decrease or increase in quantity requested.

Demand influential factors
Many factors influence the shape and position of the demand curve.
 People's willingness to spend more is considered to raise demand for
items as earnings rise.
 The availability of complementary products that compete with a
specific economic commodity tends to reduce demand for the good since
similar customer demands can be met.
Also, the availability of near complementary products has a tendency to
raise the demand for low-cost commodities, since customers may find it
more useful to use two goods together than to use them separately.
Ryanair assesses market conditions such as rising income and the
availability of substitutes, and then helps to gives the right service at the
right price to stimulate demand.

Substitutes
Substitutes
Substitutes for Ryan air include railways, sea routes, car rentals and
Eurotunnel.
These are the different ways of transport which customer can take for going
other than airlines.
The alternative substitute for the airlines are Easyjet, Wizz Air and Air
Lingus.
Sensitivity of customers to change in price of Ryan air flights
 Customers have a keen watch on change in airline prices as Ryanair is
one of the cheapest airlines operating in UK and change in price can
affect customers to choose substitute like EasyJet.
 Thus, airline has to be cautious of providing price which the customer
has expectations from their brand.

Factors for Success
Threat of new entrant for Ryanair is low.
Airlines have to follow suit with lowering of Ryanair’s fares and
competitive advantages.
By Brexit, uncertainty and trading being ceased competitors of Ryanair
have been adversely affected.
The organization Ryan air has used strategies which can put it ahead in
the race.
It has ensured that prices have been competitive by using time tested
formula.
The airline has kept tickets cheap and thus customer gets value for what
is paid.

Law of supply
It states that if all other variables remain constant, the amount supplied
and the price of the commodity are directly connected.
 Simply put, when the price of a good is raised, the supplier increases the
supply of that good in the market.
The law of supply illustrates a manufacturer's behavior as the price of
services and goods changes.
When the price of a good rises, the seller increases supply in order to
profit from the higher price.
According to the law of supply, when the price of an item rises, providers
aim to improve their profit by increasing the quantity available for sale.
Organizations that want to grow their revenue anticipate to be paid a high
price, thus output will be higher on their end.

Factors and limitations
Cost of Production: When the cost of raw materials or labor for
producing a unit of supply changes, the volume can change as well,
assuming the selling price remains constant.
The variable cost that influences the profit margin is a significant
component in determining the production quantity.
Changes in technology: Advanced technology can improve the
efficiency with which units are manufactured while lowering
manufacturing costs.
Taxes: Taxes levied on the manufacture of goods place a cap on
profitability.
 If a producer is required to remit a portion of sales as tax, he or she
is less likely to increase supply.

Theory of supply
The theory of supply followed by Ryan air is as follows:
Costs
 If price of good increases, quantity of good may increase.
Substitutes
 If different substitutes for the product decline then quantity of
product being supplied will get affected.
Future
 It is predicted how sales can be affected in the future.
Technology
 Technology advancement changes the production costs.

Movement along curve of supply

The supply curve in the diagram has an upward slope, indicating a
positive relationship between amount supplied and price.
 Suppliers supplied quantity Q3 when the price of the commodity
was at P3.
 With an increase in price, the amount of goods given increases as
well.
The supply curve is trending upwards because the supplier may
determine the quantity of items to make and then bring to market over
time.
 At any given time, the supply that a seller brings to market is fixed,
and the seller must choose between selling or withholding stock from
sale.

Change in curve of supply
The supply curve shifts as a result of numerous causes or elements.
One important aspect that determines the supply curve is market demand.
 Aside from demand, there are a number of additional factors that can influence
the market situation.
The recent covid issue, which has the potential to ruin the entire production
cycle.
The quantity of products on the market is constantly changing at this time.
 This has a significant impact on the supply situation for many items, even when
there is a high degree of product demand in the market.
 Changes in the supply curve were also influenced by the country's inflation rate.
This could indicate that when the currency value rises, the supply in the market
becomes more stagnate, while in the opposite circumstance, the entire situation is
influenced.

CONCLUSION
 The microeconomic factors were discussed having an effect
on the airlines. The company background and operations
were talked about.
 The article was reviewed for the company Ryanair and the
pricing strategy influence on sales of the company was
discussed. The concept of elasticity in relation to Ryanair was
discussed of how it fits in for the company.
 The concept of demand and supply with movement in both
the curve and changes in the curves were discussed. These
were related to Ryanair of how strategy is affected by the
factors. Factors behind these concepts were also highlighted.
 Substitutes of the airlines were talked about and the factors
for success of airline were reflected.

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