I was recently pricing out airfare because my husband and I are thinking of traveling to Europe. As I was doing so I was thinking: "I am so happy that Airfare has not increased in lockstep with inflation."
What? I'm so happy that airfare is so cheap? Absolutely.
Airline ticket prices have not been moving relative to inflation; “in constant year 2000 dollars (in "real" terms), the average round-trip domestic fare fell from $441.69 in 1979 to $267.74 in 2012” (Airlines For America). By looking at 1990, the average price was $500.00, which adjusted for inflation would be $888.00 in 2013 (Bureau of Labor Statistics BLS.gov).
The average airline price in 2012 was $375.00 so the prices could double and still be less than inflation projections from 1990 (RITA).This is certainly not evidence that consumers have had enough surplus and now it is time for producer surplus, but it indicates a slowly decreasing profitability of the industry because costs are moving relative to inflation; the gap between price and cost has dwindled.
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What? I'm so happy that airfare is so cheap? Absolutely.
Airline ticket prices have not been moving relative to inflation; “in constant year 2000 dollars (in "real" terms), the average round-trip domestic fare fell from $441.69 in 1979 to $267.74 in 2012” (Airlines For America). By looking at 1990, the average price was $500.00, which adjusted for inflation would be $888.00 in 2013 (Bureau of Labor Statistics BLS.gov).
The average airline price in 2012 was $375.00 so the prices could double and still be less than inflation projections from 1990 (RITA).This is certainly not evidence that consumers have had enough surplus and now it is time for producer surplus, but it indicates a slowly decreasing profitability of the industry because costs are moving relative to inflation; the gap between price and cost has dwindled.
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