An airline has 200 seats in the coach portion of the cabin of an Airbus A340. It is attempting to determine how many seats it should sell to business travelers and how many to vacation travelers on a flight between Chicago and Dubai that departs on Monday morning, January 25. It has tentatively decided to sell 150 seats to business travelers and 50 seats to vacation travelers at $4,000 and $1,000, respectively. It also knows:
a) To sell an additional seat to business travelers, it would need to reduce price by $25. To reduce demand by business travelers by one seat, it would need to increase price by $25.
b) To reduce demand by one unit among vacation travelers, it would need to increase price by $5. To sell an additional seat to vacation travelers, it would need to reduce price by $5.
Assuming that the marginal cost of carrying either type of passenger is zero, is the current allocation of seats profit maximizing? If not, would you sell more seats to business travelers or vacation travelers?