Southwest Airlines and Microeconomics
John Divler
Rasmussen College

Author Note
This research is being submitted on June 14, 2010, for Mr. Bergeen’s Microeconomics course at Rasmen College by John Divler.

Southwest Airlines and Microeconomics Southwest Airlines was created in 1967 and is headquartered in Dallas, TX. Southwest offers flights to their passengers to get them to their destinations when they want to get there, on time, at the lowest possible fare. The advantage that Southwest has in the marketplace is their commitment to their customers. The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit …show more content…

Flying is a luxury and extremely elastic, but also depends on the customer’s reason for flying. If Southwest raised their prices the supply would go up and the demand for them would go down. There are too many substitutions that can be made instead of choosing to fly with them. Substitutes such as traveling by bus, train, car, or even avoiding travel all together are present. Customers have started using other means of travel besides flying during these unsettled times in our economy. These substitutions would become high in demand if Southwest raised prices to meet their revenue goal. If other airlines didn’t follow suit they would get the ticket sales of the customers’ that must fly. While it is necessary to focus on the idea of being profitable and maximizing the cost of the flight revenue Southwest would have to examine what the consequences would be of trying to raise their revenue. For Southwest to be competitive in the market they must have an excellent marketing mix. The marketing mix has four main sections which include product, price, promotion, and place (Tanner & Raymond, 2011). These four sections should be designed in such a way that Southwest’s offering reduces shareholder risk while maximizing a customer’s lifetime value. These will lead to a lifetime of revenues if done correctly. When looking at Southwest from an economics view they are operating in an oligopoly. They are in a market