Air Transport in the UK Essay Example | Topics and Well Written Essays - 1500 words

Air Transport in the UK - Essay Example According to the report  there are two key drivers of air transport demand in the UK economy. One is growth in income in the long-term and the other one is fall in the real cost of fares of air transport. With the decline in air fares and rise in income, the passengers are expected to increase their air travel. However, with fall in the air fares, the airlines are unable to cut down operational costs and due to this, the sector has to meet increasing cost for emission of fuels. The figure below shows the key factors of air transport demand in the UK.This research highlights that  income elasticity of demand in economics is used to measure the responsiveness of quantity demanded of a good with respect to the income change of the individual demanding the good, holding all other things constant. Mathematically, it is calculated by taking the ratio of change in the percentage of quantity demanded to the change in percentage of income.  Income elasticity of a good which is greater t han 1 (luxury good) is considered to be highly elastic. The good whose elasticity lies in the range of 0 to 1 (normal or necessary good) is considered to be elastic and the one with elasticity less than 0 (inferior good) has negative elasticity. Also, goods having income elasticity equal to 1 is unit elastic. The figure below shows different types of elasticity.  Therefore, income elasticity differs with the nature of goods. The demand for inferior good is negative, less elastic for normal good and that for luxury good, it is highly elastic.