On a popular air route, an airline offers two classes of service: business class (B) and economy class (E). The respective demands are given by:

P_B = 540 − .5Q_B and P_E = 380 − .25Q_E.

Because of ticketing restrictions, business travelers cannot take advantage of economy’s low fares. The airline operates two flights daily. Each flight has a capacity of 200 passengers. The cost per flight is $20,000.

a. The airline seeks to maximize the total revenue it obtains from the two flights. To address this question, create a spreadsheet patterned on the example shown. (In your spreadsheet, only cells E2, E3, E4, C9, and D9 should contain numerical values. The numbers in all other cells are computed by using spreadsheet formulas. For instance, the total available seats in cell E5 is defined as the product of cells E2 and E3.)

b. What fares should the airline charge, and how many passengers will buy tickets of each type? Remember that maximum revenue is obtained by setting MRB equal to MRE. After you have explored the decision by hand, confirm your answer using your spreadsheet’s optimizer.

c. Suppose the airline is considering promoting a single “value fare” to all passengers along the route. Find the optimal single fare using your spreadsheet’s optimizer.

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DUAL AIRFARES Planes Seats/Plane Cost/Plane 20,000 Total Seats 400 6 BusinessNon-Bus Total 9 Number of Seats 400 10 One-way Fare 330 12 13 Revenue 88,000 66,000 154,000 MR 280 15 16 17 18 19 MC 100 Total Cos 40,000 Total Profit 114,000