Microeconomics Course

CC: ECON201
Supply and Demand of Emirates Airline
Tickets

Instructor’s Name: Dr. Mahmoud

Abouraia Submitted by: Nada Essam AL
Harouny ID: 200016400
Date: 17/4/2017
Supply and demand of Emirates

Table of contents

Contents page number

1. Introduction… 3
2. About Emirates Airline. 4
3. Demand analysis of Emirates 4
3.1 Demand schedule of Emirates… 4
3.2 Demand curve of Emirates… 5
3.3 Summary of the demand curve… 5
4. Determinants of the demand of Emirates… 5&6
5. Supply analysis of Emirates… 7
5.1 Supply schedule of Emirates… 7
5.2 Supply curve of Emirates… 7
5.3 Summary of the supply curve… 8
6. Determinates of the supply of Emirates… 8
7. Market shortage and surplus of Emirates… 9&10
8. Price elasticity 10
9. Conclusion… 11
10. References… 12

Introduction:
 Supply and demand of Emirates

Supply and demand relationship always in the first zone of the microeconomics
studies. The supply curve has an equilibrium quantity and price point with the
demand curve that helps in analyzing the market normality status. But their rules
just applied on the products that vary in the prices which are helping in graphing it.
Actually, the factors that affect the supply and demand curve, not limited to the
price of the products, there are a lot of the factors that change the supplier
decisions’ in producing the product and sell it as the changes that can affect the
demander decisions’ in buying the product. For example, the demander income
status, the public holidays, and the demanded priorities. In my research paper, I
will apply all the theories of supply and demand on a very useful example to make
it clear. I have chosen the Emirates airline tickets during the season of the school
holidays as my research paper’s topic since it’s more exposed to price changes.
The research will start by making a demand and supply schedule and graph of the
school holidays’ season in 2017, determine the equilibrium price, supply, and
demand for each with explaining the results and compare it with our learning
outcomes during the semester. Then discuss other factors that influence demand
and supply other than price in details. In addition to that, calculating the
shortage/surplus at each price level and the effects of price elasticity of demand
and supply in the market. The aim of the research is to investigate the concept of
supply and demand theory in a simple way.

About Emirates airline:

 Supply and demand of Emirates

Emirates airline is founded on March 25, 1985, which is owned by Dubai government,
especially by the government of Dubai’s investment corporation of Dubai. The company has
been ranked in the Middle East as the largest airline company which is operating over 3600
flights per week from its location at Dubai International Airport, in more than 154 cities in 81
countries across six continents. In addition to that, the company certified as the world’s fourth
largest airline in the revenues’ schedules and in terms of international passengers carried.

Supply and Demand of the firm:

As any airline company, the supply and demand relationship change very fast. Each day has
different ticket prices than the other, depending on many factors. The research paper will clearly
view an example of the supply and demand schedule, the curve of the ticket prices, and the seats
available with the number of the passengers in the first days of the school's holiday, to compare
it with the normal day's prices.

Figure1: Demand Schedule of Emirates airline tickets

Price Quantity
(AED) Demanded
1700 1000
2000 950
2200 800
2350 600
2500 550
2600 500
3200 350
3350 300

Figure 2: Demand Curve of Emirates airline tickets:

Supply and demand of Emirates
 Supply and demand of Emirates

4000

3500

3000

2500

Ticket prices
2000 Demand
Curve
1500 1
0
0
0

5
200 300 400 500 600 700 800
0 900 1000 1100
0
Quantty demanded
0

The graph above shows how a change in the price of the tickets during 8 days starts from the first
day of the summer school vacation for the teachers can influence the quantity of demand. As we
can see that the demand curve is going downward, which means that the higher the price the
lower the demand asks for traveling, and the opposite. So, Price and demand have an inversely
proportional relationship. The company knows that this period of each year can cause a surplus
of people wanting to travel to Egypt, for the first 3 days it starts with the higher price then starts
to slowly decrease the price in order to save the flights fully.

Other determinants that influence the demand for Emirates tickets:

 Income:

Any airline tickets will be affected in straight away with the change in incomes, especially
during the period of the startup vacation like the end school vacation. Consequently, they are
showing a positive proportional relationship. In this case, Emirates airline already targeted those
people with high-income status, but even though they still care about the price deal.
 Supply and demand of Emirates

 Substitutes:

Emirates airline is surrounded with more than one competitor; the most identified, one is Etihad
airline which targets the same segment. There are also al-Arabiya airline and fly Dubai airline
that competes with the prices because the consumers have many choices and are able to
substitute easily the tickets from Emirates airline to the one which offers the lowest price if
Emirates has decided to increase its price.

 Tastes and what customers prefer:

As we know that the more the company target the customer desire and needs the more it is
demanded. Thus, all things surrounding the customers can influence its desires and impact it, for
example, advertisements which convert the customer want to a need. Also, the image of the
company in the market and its services that people have seen their quality.

 A Change in the Number of Buyers:

The number of potential buyers that may purchase your company's products or services
determines the size of the market. If the size of the market decreases, the demand curve shifts to
the left, showing a higher price and fewer passengers. If the size of the market increases, the
demand curve shifts to the right, showing a lower price and a larger number of passengers.

Figure 3: Supply Schedule of Emirates airline tickets

 Supply and demand of Emirates

tickets:

Curve of Emirates airline Figure 4: Supply

4
0
0
0

3
5
0
0

2
3
P 0
r 0
0
i 01
c 05
e
0
0
2
5
10
0
0
0
2 3 400 6
0 0 0
5 0 0 500 0 (
Quantity Suplied
0 seats)
0

0
The graph above shows how a change in the price of the Emirates tickets can influence the
quantity supplied. As we can see that the supply curve is going upward from the left to the right,
which is meaning that the higher the price the higher the quantity supplied can be produced or
provide (the seats), and the opposite. So, Price and Supplier have a directly proportional
 Supply and demand of Emirates

relationship. The company knows that this period of each year it can face a shortage of the seats
available for passengers to travel, so it is starting to manage that by providing more than one
flight during the day but with a higher price. As long as they increase the seats the price also
goes up and the opposite. Price is just one from many other reasons which can control the supply
and cause the left and right shift of the curve.

Other determinants that influence the Supply for Emirates tickets:

 The cost of flights preparation:

If the input prices increase such that the prices of essential compositions rise, in the case of
Emirates tickets, if they decided to add more flight in the day to cover the shortage in the flights,
they should make the airplane ready and ensure its safety, all these things may cost more.

 Technology:

Any enhancement in the ways of the flight's services with new technology to meet the customer
expectation will affect the seat availability too.
 Supply and demand of Emirates

Figure 5: Supply and Demand Schedule of Emirates airline tickets (Shortage

and Surplus):

Figure 6: Demand and supply Curves of Emirates airline tickets:

 The green arrow shows the surplus area

 The gray arrow shows the shortage area

 The equilibrium point is the affordable price where the quantity supplied equals the
quantity demanded. In the case of Emirates airline tickets, the equilibrium price is at AED
2350, and the equilibrium quantity supplied/demanded is 600 passengers/seats. This point
 Supply and demand of Emirates

can be changed if the supply and demand curve shifted as a result of the market surplus or
shortage. Surplus happens if the quantity supplied is more than the demanded so they
decrease the price by making tickets promotions or any other deal with the customer to not
waste the seats empty. On the other hand, when the shortage happens, they increase the price
to decrease the quantity demanded.

Price elasticity:

• Emirates airline price is almost inelastic for the business class passengers. They are the
most profitable to the Emirates and are willing to pay for their luxury.
• Emirates can’t compete at the level of the economy class, where the travelers are concerned
as they are very price elastic and prefer to choose low-cost tickets.

Conclusion
 Supply and demand of Emirates

To conclude, the Emirates airline company is the largest one in the Middle East with providing
unique services. This success story has been sustained for more than 30 years. The aim of the
report was to apply microeconomics perceptions and laws for a real, existing company (Emirates
airline). Emirates airline demand is extremely impacted by more than the ticket’s price, the
income, substitutes, relative products, consumer’s tastes and preferences, and change in the
number of buyers, all these are facts which impact the quantity demanded. While supplier
influenced by its cost of inputs, the technology level, the price of related goods, expectations of
producers as to future prices, and the number of firms producing the good. Both having inelastic
graphs because its consumers are having high brand loyalty.

References:
Supply and demand of Emirates

 Emirates (airline). (2017). En.wikipedia.org. Retrieved 16 April 2017,

from https://en.wikipedia.org/wiki/Emirates_(airline)

 Emirates Flight Information. (2017). Seatguru.com. Retrieved 16 April 2017,

from https://www.seatguru.com/airlines/Emirates_Airlines/information.php

 Emirates United Arab Emirates | Book Flights, Hotels and Car Rental. (2017). Book Flights,
Hotels, and Car Rental. Retrieved 16 April 2017, from https://www.emirates.com/ae/english/

 Factors That Affect Demand Curve. (2017). Smallbusiness.chron.com. Retrieved 16 April 2017,
from http://smallbusiness.chron.com/factors-affect-demand-curve-11258.html

 Haris, (2017). Emirates ppt. Slideshare.net. Retrieved 16 April 2017,

from https://www.slideshare.net/pujc/emirates-ppt

 Information about Emirates Airline. (2017). Traveltips.usatoday.com. Retrieved 16 April 2017,

from http://traveltips.usatoday.com/information-emirates-airline-21521.html

 Khan Academy. (2017). Khan Academy. Retrieved 16 April 2017, from

https://www.khanacademy.org/economics-finance-domain/microeconomics/supply-
demand- equilibrium/demand-curve-tutorial/a/what-factors-change-demand