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MBSA1513

Economic analysis
MBSA1513
Abul Quasem Al-Amin
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Individual assignment: Airlines Seek Out New Ways to Save on Fuel as Costs Soar
Title : Individual assignment: Airlines Seek Out New Ways to Save on Fuel as Costs Soar
From November 13, 2014 at 05:36 PM until November 24, 2015 at 05:36 PM
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Assignment type : Individual
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Description
Economic analysis: MRC1513
Individual assignment (case study): Marks 30
Deadline: November 24, 2014

Read the article and answer the following questions.

Airlines Seek Out New Ways to Save on Fuel as Costs Soar

The New York Times
June 11, 2008

The financial pain of higher fuel prices is particularly acute for airlines because it is their single biggest expense. Airlines pump about 7,000 gallons into a Boeing 737 and
about 60,000 gallons into the bigger 747 jet. Each generation of aircraft is more efficient: An Airbus A330 long-range jet uses 38 percent less fuel than the DC-10 it
replaced, while the Airbus A319 medium-range jet is 27 percent more efficient than DC-9 it replaced.
a)

Is the price of fuel a fixed cost or a variable cost for an airline? Explain.

b)

Explain how an increase in the price of fuel changes an airlines total costs, average costs, and marginal cost.

[4 marks]

14/11/2014 6:02 PM

Assignment - MBSA1513 - MYIBS

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[6 marks]
c)

Draw a graph to show the effects of an increase in the price of fuel on an airlines TFC, TVC, AFC, AVC, and MC curves.
[14 marks]

d) Explain how a technological advance that makes an airplane engine more fuel efficient changes an airlines total product, marginal product, and average product.
[6 marks]
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14/11/2014 6:02 PM