externalities within the airline industry

1 . Does the transaction of a buyer and seller directly affect a third party ? Is the

effect a negative or positive externality ? Explain

In Airline Industry , the airlines provide services to the customer in form of high speed transportation , catering , and other auxiliary services . The industry actually requires lots of other activities like ground handling , airplanes purchase and maintenance , fuel purchase hospitality services etc . Now the whole of the industry related to commercial air transportation will get affected because of any transaction between the buyer and seller . A purchase will become

a reason for more demand and hence the suppliers of above mentioned auxiliary services despite being a third party will also get benefited The effect in these transactions is a positive externality with third parties like airplanes manufacturers like Boeing and Airbus ground handlers like Dnata , Gate Gourmet etc . because of being a supplier to different airlines are getting benefited ( HYPERLINK "http /pespmc1 .vub .ac .be /Default .html "

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2 . Research whether the industry produces public goods or common resources

Are the goods or resources rival , excludable , or neither ? Explain

Airlines are operated by different private and government supported companies . But they don 't produce any public good or common resources (Thomson South-Western , 2007 . The consumer has to shell out money for availing these services . The good produced by this industry is both excludable as well as rivalrous . Seat occupied by a consumer actually prevents other person to use the same . The excludable nature of the good is clearly visible from the fact that the consumers can be stopped from utilizing the services on the ground of non-payment of the charges which is actually the first step to avail this sort of service . The airlines allow only those people to board the plane who have bought the ticket The ticket is actually the most elementary token for availing the service and hence makes the product excludable as well as rivalrous References

Thomson South-Western (2007 . Public Goods and Common Resources [online] Available from : HYPERLINK "http /www .ssc .wisc .edu 7Embrown /11_4E .ppt http /www .ssc .wisc .edu mbrown /11_4E .ppt

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HYPERLINK "http /pespmc1 .vub .ac .be /Default .html " rincipia Cybernetica Web Externality [online] Available from HYPERLINK "http /pespmc1 .vub .ac .be /ASC /EXTERNALITY .html http /pespmc1 .vub .ac .be /ASC /EXTERNALITY .html...