question archive Before the airline industry was deregulated, the Airline Pilots Association (ALPA) was generally regarded as one of the most successful unions in raising wages of its members; the International Ladies Garment Workers Union (ILGWU), on the other hand, had only limited success in raising wages
Before the airline industry was deregulated, the Airline Pilots Association (ALPA) was generally regarded as one of the most successful unions in raising wages of its members; the International Ladies Garment Workers Union (ILGWU), on the other hand, had only limited success in raising wages
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Before the airline industry was deregulated, the Airline Pilots Association (ALPA) was generally regarded as one of the most successful unions in raising wages of its members; the International Ladies Garment Workers Union (ILGWU), on the other hand, had only limited success in raising wages. First, use the four laws of derived demand to explain this difference. Second, after deregulation of the airline industry, over 40 new airlines began business. What was the likely effect on the elasticity of demand for airline pilots? Which law of derived demand does this involve?
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The Four Laws of Derived Demand were developed by John Hicks and Alfred Marshall in the early 1900s. The laws are:
| 1. Demand is more elastic if there are more substitutes. | The garment workers were less skilled laborers than pilots. |
| 2. Demand is less elastic if the item is a small part of some other product. | Pilots are an important part of the airline business. |
| 3. Demand is more elastic for an item that is a part of an item with elastic demand. | Garments are probably more elastic than airline flights. |
| 4. Demand is more elastic if the item is an intermediate good with elastic demand. | This doesn't apply to either type of worker. |
When more airlines went into business, there was likely more demand for pilots or at least more different opportunities for pilots to find employment at various wage rates. Since no airline flight can happen without a pilot, the demand is at least somewhat inleastic.
