A. Economic Occurrences
Factors like recession and income earned by the consumers affect the businesses within the economy affected. Countries like Cambodia benefit majorly from the tourism sect-or which means that the economy is affected by incidences within the air travel market. In essence, with factors like low work attendance due to issues like strikes the supply of services is likely to reduce and consequently, the demand will be affected ( Smeral, 2017 ). There are several ways in which incidences such as recession and strike of workers in the air travel industry will affect the economy which include lack of income for individuals.
Recession is an instance where an economy experiences lower levels of activities hence lowering production and profits gained by various sectors in the particular economy. Essentially, the decrease in economic activities means that income reductions pare likely to occur with the straining of businesses that are dependent on the tourism industry and other industries. Without enough income as a result of a lower rate of activities, most traveler's including those traveling to various tourist destinations within the country, will reduce their movement. During a recession period, there is likely to be a reduction in spending as individuals and companies consider spending on needs rather than wants ( Nadar & Vijayan, 2020 ). In this case, the air travel market will suffer a reduction in demand. Despite the air travel industry's ability to supply, the demand may be lower due to fewer travelers.
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The concurrent occurrence of the pilots' recession and striking is likely to affect the equilibrium price and quantity of the travel market. For example, the strike means that the travel industry is incapable of providing services during the stalemate period. Essentially, the unavailability of services translates to the offsetting of the equilibrium as there is a lower or nonexistent supply against a possible demand for the services for travelers from outside the country. This fact means that on top of the recession where there is less movement of money, there is even more reduction in activities, including businesses that are conducted within the travel market such as by travel agencies and hospitality business in air travel premises. In essence, as a result of the recession where there is little money to spend, the demand curve for the travel services will decrease as there are low business activity and more value from intrinsic and basic needs than luxuries such as touring ( Smeral, 2017 ). The supply curve will also be affected tremendously by the unavailability of workers in the travel sectors though the demand will be lower than the number of services supplied.
B. Demand Elasticity
There are various ways to determine the price elasticity of demand and whether the demand for the air travel price is elastic. One of the factors that could affect the demand is the existence of close substitutes. The availability of other service providers that are not dependent on the striking workers could mean that the prices' reaction will be strong. If tourism companies, for example, can airlift their clients, then the costs of air travel will be highly elastic. However, the prices may remain constant if there are no options in the market. On the other hand, the cost of the travel service affects elasticity ( Fredman & Wikström, 2018 ). In this case, the costs of air travel services are considerably high in consideration of other means of traveling. This fact means that the slight increase in the prices will cause a lower demand among the consumers. With low incomes, higher costs of traveling will decrease the number of consumers as the cost, in this case, is sensitively significant to the market.
The time that is taken in considering prices in the market may cause the elasticity in various ways. For instance, a more prolonged standoff between pilots and the management and a more extended period of hiked prices may cause the need by travelers to move closer to their destinations to avoid the demand for air travel services. If the stalemate takes too long, the elasticity of the prices experienced becomes more intense. In cases where an economy experiences a recession, the government may ease taxation to allow the businesses to thrive. In this situation, the reduction of taxes for the tourism industry and the air travel industry may affect the demand for prices by causing the need to lower costs to accommodate the leisure travelers. Therefore, there is a higher likelihood of compulsion to use travel services as they are affordable. Owing to these factors, it is clear that the demand for air travel price is elastic. The most significant cause of strong elasticity, in this case, is the period of consideration ( Craig, 2019 ). This fact shows that the pilots' strike will continue to affect the economy more with the stalemate's longevity. If it takes too long, then the air travel market will suffer permanent and irreversible changes. For example, the movement of the consumers closer to their businesses or tourist destinations is likely to have a lasting impact on reducing the number of consumers ( Smeral, 2017 ). Additionally, the consumers of these services may consider closing down their business, which is a lasting impact on the air travel business as the international companies provide revenue as part of the market for air travel.
C. Income Elasticity of Demand
Income elasticity of demand relates to the number of goods or services demanded concerning the change in income. This statement suggests that change in the amount of income earned by consumers is likely to affect the quantity of products they demand from the supplier. The decrease in revenue resulting from the recession will cause a reduction in the demand for airline services. This fact is because there is less movement by leisure travelers due to the need to spend less money. The airline industry's revenue will, therefore, fall due to a reduction in the use of these services, causing losses to the airline companies. The airline industry will be suffering losses as a result of lack of a proper flow of clients.
Additionally, workers' strike is likely to accelerate the decline in revenue as the company will make losses in consideration of salary increment amidst lower customer availability. In particular, the reduction in consumers and revenue as a result of lower income is related to price elasticity of demand ( Craig, 2019 ). The increase in the cost of air traveling on a long-term basis is likely to cause lower usage of the airline services, which is due to a lack of enough money for expensive services as a result of lower-income. Both business and leisure travelers experience the effect of adjusting the budget to accommodate changes in the economy especially due to the recession.
References
Borko, seth. (2018). 10 Years Later: How the Travel Industry Came Back From the Financial Crisis. Skift. https://skift.com/2018/09/14/10-years-later-how-the-travel-industry-came-back-from-the-financial-crisis/
Craig, C. (2019). Estimating the income elasticity of demand for international air travel.
Fredman, P., & Wikström, D. (2018). Income elasticity of demand for tourism at Fulufjället National Park. Tourism Economics , 24 (1), 51-63.
Nadar, E. N., & Vijayan, S. (2020). Managerial economics . PHI Learning Pvt. Ltd...
Smeral, E. (2017). Tourism forecasting performance considering the instability of demand elasticities. Journal of Travel Research , 56 (7), 913-926.
