Question
$ Price Charged 700 $ 2,400 Variable Cost per Ticket Number of Seats Expected to Be Sold Business Pleasure 75 150 75 165 135 45
$ Price Charged 700 $ 2,400 Variable Cost per Ticket Number of Seats Expected to Be Sold Business Pleasure 75 150 75 165 135 45 Pleasure travelers start their travel during one week, spend at least 1 weekend at their destination, and return the following week or thereafter. Business travelers usually start and complete their travel within the same work week. They do not stay over weekends. Assume that round-trip fuel costs are fixed costs of $24,900 and that fixed costs allocated to the round-trip flight for airplane-lease costs, ground services, and flight-crew salaries total $182,000. 1. If you could charge different prices to business travelers and pleasure travelers, would you? Show your computations. 2. Explain the key factor (or factors) for your answer in requirement 1. 3. How might Air Americo implement price discrimination? That is, what plan could the airline formulate so that business travelers and pleasure travelers each pay the price the airline desires
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