Economic Profile of the Airline Industry Airlines use a formula that combines yield and inventory costs to determine ticket prices. While it is imperative to focus on being profitable, the goal is to maximize your cost of revenue from flying. A huge factor that encourages the increase in the cost of tickets concerns the fact that a customer orders a ticket close to the departure date, we define it as a risk factor because he needs to recover all the unsold seats. A high percentage of revenue is dedicated to overhead costs such as fuel and labor. When the ticket price is higher with one airline than another, the customer interprets it as an excessive cost. Demand is greatly influenced by external market conditions that exist such as taxes; by law it is legal to add taxes to airline tickets as they are considered a luxury good (Button, 2005). Price elasticity of demand in the airline industry depends on the number of competitors on that route. For example, on a busy route such as New York to Los Angeles, the price elasticity of demand for airlines is high, passengers may switch from one airline to another (Econ FAQs, 2007). They can replace low-cost airlines with higher-cost ones and therefore the price elasticity is high. On the other hand, non-competitive routes have inelastic demand. The article cited below provides the example of the route between Charleston, WV, and Atlanta costing $1,000 (Jerram, 1998). In general it is difficult to replace air travel. Other modes of transport, such as roads and railways, take relatively longer travel times. So if a person has to travel they have to use airlines. However, if there is a... half of the card... with frequently asked questions. (2007). Air Transport Association, retrieved January 15, 2008, from http://www.airlines.org/economics/specialtopics/Econ+FAQs.htmFRBSF. (2002). Economic letter. Retrieved January 21, 2008, from FRBSF: http://www.frbsf.org/publications/economics/letter/2002/el2002-01.pdfJerram, R. (1998). The airline industry. Retrieved February 5, 2008, from London School of Economics and Political Science: http://www.mega.nu/ampp/PEGB/chap11.htmRiley, G. (2006), Externalities - Government Policy Options, retrieved February 12, 2008 from: http://tutor2u.net/economics/revision-notes/a2-micro-externalities-policy-options.htmlRecent policy initiatives to raise low wages. (2004). Retrieved February 10, 2008, from ACORN.ORG: https://www.acorn.org/index.php?id=203Zabin, C. (1999). Livable wages at the Port of Oakland. Retrieved February 14, 2008, from http://ww