Consider the problem of managing sales of automobile parking permits at the Apache Blvd. parking structure, that has a capacity of 1,500 parking spaces. ASU\'s PTS sells the available capacity via(a) annual permits (long-term contracts) and (b) daily-use permits(spot market). For the purposes of this question, assume that noother forms of parking permits exist.

ASU PTS earns a revenue of $780 per unit of space sold via long-term annual permits. Annual permit holders (e.g., FT students,faculty, staff) use the space everyday. The revenues from the market are uncertain due to uncertainty in daily demand.However, an analyst at ASU PTS estimates that on average, a unit ofspace sold via spot markets earns an annual revenue of $2,100. The demand in the spot market on any day is normally distributed withmean 850 and a standard deviation of 500.

a) How many long-term permits should ASU PTS sell?

b) A limited capacity of long-term permits frustrates faculty,staff, and students if they are unable to purchase one. The analystat PTS realizes an error in his calculation and revises theirestimate of the expected annual revenue from the sale of 1 unit ofspace via the spot market. Based on their revised estimate, they promise to sell 70% of their capacity via long term annual permits.What is their revised estimate of the expected annual revenue fromthe sale of 1 unit of space via the spot market?

Answer rating: 100% (QA)

a To determine how many longterm permits ASU PTS should sell we need to compare the revenue earned f... View the full answer