A newly established hotel wants to make it simple for its customers by offering only two rates: one weekend rate and a midweek rate. The variable costs associated with making each room ready for new guests are estimated at $10 during midweek days

(Monday– Thursday) and $18 for weekend days (Friday– Sunday). The midweek days and weekend days have the following price– response functions:

The hotel has a capacity of 500 rooms in both the midweek period and the weekend period. What is the profit- maximizing single price? What are the profit- maximizing variable prices? What is the percentage increase in total profit from introducing variable pricing?

Transcribed Image Text:

Midweek: d(p)=1,200-8p Weekend: d(p)=1,200-12p