ECONOMICS

Economics

[Name of the Wrier]

[Name of the Institute]

Economics

Explain what will happen to demand, supply and the price of airline tickets in Bahrain if: ( think of any similar air line in any developing country and apply it, if you are not familiar to the mentioned airlines )

Factors that Affect Supply and Demand

Factors influencing changes in demand for goods / services (primarily):

Change in consumer income

Change in the prices of complementary

Change in the prices of substitute goods

Expected changes in the market situation

Tastes and preferences of customers

Change in the number and structure of the population

The supply of goods / services is the amount of goods / services that the producers are willing to offer for sale at a given price level.

Factors affecting the changes in the supply of goods / services (primarily):

Variation in the cost of production

Change in prices of goods assortment

Change in the weather (mainly in agriculture, tourism)

Change of government subsidies

Change in the amount of indirect taxes (vat, excise duties)

Change in the number of producers in the market

The Government Levies Taxes on Air Travel

Taxes are used to control the behavior of economic agents inducing (tax cut) or (raising taxes) in the implementation of certain activities. Having a legal right of coercion, the state has the ability to have at their disposal considerable money collected in taxes. Taxes can be defined as state revenues collected on a regular basis with its rights enforcement. Also, taxes can be defined as mandatory, royalty-free, non-refundable fees charged by government agencies to meet the state's needs for financial resources (Waterson, 2003, pp.32-50).

According to the definition, a tax should be understood not only those payments, the title contains the word "tax", such as value added tax, income tax, etc. The tax characters are customs duties, compulsory contributions to state funds, such as pension funds, etc. All these payments together form the tax system (Scherer & Frederic, 2004, Pp 65-75). For example; if we consider the example of Pakistani Air line, which represents an air line of one of the developing countries of South Asia. If the government levies taxes on air travel, demand for the air tickets will decrease in return; because the air line company will raise its fares in order to compensate taxes and this will reduce the frequency of air travelers in re-turn. This will automatically raise the prices of air tickets which will have direct impact of supply and demand for the air tickets. Public will prefer to go for other ways of transportation rather than travelling by air.

Government spending and taxes are widely used by the authorities to act on the economic situation. Manipulating them, the state can affect aggregate demand and GDP. Thus, the government increases or decreases and the aggregate demand for goods and services, and demand for made in the year of final goods and services (GDP). In today's economy is steadily growing share of government finances in the GDP (including the state budget, with its main components - the state budget expenditures and taxes) (Posner, 2008, pp. 807-27).  Manipulation of public spending and taxes related to a specific business activity, ...