Question
The market for round trip airline travel from Madison to Cleveland over the Memorial Day holiday consists of two types of customers. Let X 1
The market for round trip airline travel from Madison to Cleveland over the Memorial Day holiday consists of two types of customers. Let X1denote the demand for airline tickets by students, and let X2denote the demand for airline tickets by non-student adults. Let the price of a round trip ticket be denoted by Px, and suppose that everyone who purchases a ticket pays the same price. The demand functions of the two customer groups has been determined as follows
X1= 1900 -30Px
X2= 4500 -90Px
(a) What is the total market demand for airline tickets, as a function ofby Px? Keep in mind that the total demand is the sum of the group demands (students plus non student adultsthis is in a lecture). I suggest you calculate the demand forX1andX2 and the total for X1+X2. This question requires you to show your work and produce a mathematical answer.
(b) Suppose that the price-elasticity of demand by students, at the priceby
Px, is-2. What is the price-elasticity of demand bynon-student adults? (consider raising the price by $1 to address this question). This question requires you to show your work and produce a mathematical answer.
(c) At what price is the total revenue (for the entire market) maximized? This question requires you to show your work and produce a mathematical answer.
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