Task4.ABC three questions. Detailed solution process

Task 4 Suppose Rex Airlines flies the route from Sydney to the Gold Coast It is the only airline that services this route. Rex Airlines nds that there are two different types of people that y to the Gold Coast business people and holiday makers. The demand function for business people is: 0s = 50 {113) PB [where Os is the number of business people and P5 is the price of the ticket for business people]: and for holiday makers is: OH = 80 {2(3) PH [where OH is the number of holiday makers and PH is the price of the ticket for holiday makers]. Rex Airlines esmates that the marginal cost of providing senrice to customers is a constant $30. There are no xed costs. a) If Rex Airlines can successfully price discriminate, what prot maximising price will it charge for business people and holiday makers? What sales will Rex Airlines make in each of the respecye markets? Illustrate with diagrams. b) If Rex Airlines sets a uniform price to all customers. what is the prot maximising price and quantity of tickets sold? Illustrate with a diagram. c) Compare the relative protability of multi-market pricing and uniform pricing. Does the company have an incentive to price discriminate