Dogge Inc. provides vacation lodging services to both family and senior citizen customers. Yearly demand for overnight
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Dogge Inc. provides vacation lodging services to both family and senior citizen customers. Yearly demand for overnight lodging services, Q, are as follows:
Family
PF = $40 - $0.0004QF
Senior Citizens
PS = $30 - $0.00025QS
Average variable costs for labor and materials are constant at $20 per unit
A. Assuming the company can discriminate in price between family and senior citizen customers, calculate the profit-maximizing price, output, and total profit contribution levels.
B. Calculate point price elasticities of demand for each customer class at the activity levels identified in part A. Are the differences in these elasticities consistent with your recommended price differential? Explain.
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