Suppose an airline flying on the charolette-chicago route, Ask an Expert

Economics

Question:

Suppose an airline flying on the Charolette-Chicago route has estimated the demand curves for three different types of customers: business (no advance purchase), leisure (7 day advance purchase), and discount (14 day advance purchase) travellers. They are:

Business: P = 600-Q and MR = 600-2Q

Leisure: P = 500-2Q and MR = 500-4Q

Discount: P = 400-3Q and MR = 400-6Q

Suppose there is only one class of service, hence the marginal cost of providing the service is equal for all customers and is $100. What prices will the airline charge to each of the three different segments of customers. (HINT: Set MR=MC for each class of travel)

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M9292525

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