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In: Economics

The following two equations are the demand equations for airplane trips for a business person and...

The following two equations are the demand equations for airplane trips for a business person and a vacationer, respectively. The airlines’ marginal cost is $20 per passenger.

? =620−100? ,and

? =180−40? ""

  1. What price should the airlines charge each person if the firm’s objective is to maximize profit?

  2. Does this pricing make sense? To answer this, calculate the price elasticity of demand for each customer type. Whose demand is more elastic? Explain your response.

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Expert Solution

Rahul Sunny answered 6 months ago
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