伊朗航司外汇供给中断，机票涨价约40%

English version

What happened

Majid Akhlaghi, secretary-general of Iran's airline association, said ticket prices in Iran rose about 40% due to higher operating costs and a shortage of foreign exchange.

The economics

More than half of airlines' operating expenses must be settled in foreign currency, so a disruption to foreign-exchange supply raises costs measured in domestic currency — a case of cost-push inflation: the supply curve shifts left, pushing prices up and output down. The FX shortage also pressures the currency to depreciate, further raising import costs and reinforcing the inflation.

Figures to quote

• ticket prices up about 40%

Evaluation

The size of the price rise depends on whether airlines can pass costs on; weak demand or price controls could limit it, while a recovery in FX supply or a shift to domestic-currency settlement would ease cost pressure in the longer run.

Practice question

Using this example, explain how a foreign-exchange shortage can drive inflation through costs, and evaluate the effects on airline output and consumers.