Supply and demand

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As we all know, there exists a great confusion around the world. Speculations about a possible war are being more sound every day. Fear and desperation are invading our minds and creating chaos everywhere. We are all being affected in so many ways meaning emotionally, spiritually and physically; but not being enough this uncertainty is also having awful effects on economy.

A good example of these devastating effects is the tension being felt by airlines. They are going through though times. They were slowly recuperating from losses over $10 billion caused by the incident occurred on September 11. When people started to loose trust on air transportation and even began to fear it. Now by facing a possible war, travel demand has dropped sharply, people are not willing to risk their lives by air traveling. Therefore airlines have been reducing their work force (supply).

Costs as well have gone up for airlines. The increase on the price of jet fuel has doubled from last year. This affects the industry severely, for the increase of one penny per gallon, the costs are estimated of $180 million annually. Cost of security has increased as well, since they have acquired more sophisticated technology to prevent catastrophic situations like it is hijacking.Order College Papers on supply and demand

This article could be seen as an example on the matters of supply and demand. It shows how the unwillingness of people to air travel decreases demand. This unwillingness could be a result from different reasons such as consumers income, future expectations on prices, bad advertising, or simply lack of interest on the subject; but in this case it is mostly product of one concern Fear. If people do not want to travel then prices will have to be adjusted to reach a new equilibrium point, at which quantity demanded would meet equally quantity supplied.

In the other hand talking about supply, firms are dealing with huge remarking problems. Not only costs for them have increased, but also there have been less booking for travel that caused monetary losses, obligating them cut down jobs. Unemployment will have an effect too, if households that obtain income from supplying labor to the factor market, which as well sells their services to the firms, loose their job. They will be even less likely to travel (product market) not having the enough money to do so. This could lead to bankruptcy of some financially fragile carriers or even liquidation.

Government also plays an important roll, whatever it decides to do will have a direct effect. If there is war all this losses will take effect. It also regulates security for these industries and determines procedures for them.

In conclusion there is many disadvantages generated by war and it has not even started. Yet, we are not even sure if this will take place. But one thing we should remember, noble reasons are good to fight for

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