An airline has two types of passengers: business passengers with fairly tight schedules and inelastic demand for
Question:
An airline has two types of passengers: business passengers with fairly tight schedules and inelastic demand for airline flights and vacation passengers with flexible schedules and more elastic demand for airline flights. The tables below show the demand information for both types of passengers and the market demand for a single airline flight.
Business Traveler Demand | | Vacation Traveler Demand | | Market Demand Same Price for All Passengers | ||||||
Price (dollars) | Quantity Demanded (seats) | Marginal Revenue (dollars) | | Price (dollars) | Quantity Demanded (seats) | Marginal Revenue (dollars) | | Price (dollars) | Quantity Demanded (seats) | Marginal Revenue (dollars) |
$500 | 0 | — | | $500 | 0 | — | | $500 | 0 | — |
450 | 25 | $400 | | 450 | 0 | — | | 450 | 25 | $400.00 |
400 | 50 | 300 | | 400 | 0 | — | | 400 | 50 | 300.00 |
350 | 75 | 200 | | 350 | 50 | $300 | | 350 | 125 | 266.67 |
300 | 100 | 100 | | 300 | 100 | 200 | | 300 | 200 | 166.67 |
250 | 125 | 0 | | 250 | 150 | 100 | | 250 | 275 | 66.67 |
200 | 150 | | | 200 | 200 | 0 | | 200 | 350 | 16.67 |
150 | 175 | | | 150 | 250 | | | 150 | 425 | |
100 | 200 | | | 100 | 300 | | | 100 | 500 | |
50 | 225 | | | 50 | 350 | | | 50 | 575 | |
0 | 250 | | | 0 | 400 | | | 0 | 650 | |
1. If the airline can charge only one price to all passengers and its marginal cost of supplying a seat on a flight is $300, the airline will sell seats and charge a price of $ for each seat.
2. If the airline can charge different prices to the two different types of passengers and its marginal cost of supplying a seat is still $300 per seat, then business travelers will buy seats at a price of $ per seat and vacation travelers will buy seats at a price of $ per seat.
Managerial Decision Modeling with Spreadsheets
ISBN: 978-0136115830
3rd edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair