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} denote the demand for airline tickets
by students, and let X_{2} denote the demand for airline
tickets by non-student adults. Let the price of a round trip ticket
be denoted by P_{x}, 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

X_{1} = 9000 –
30P_{x}

X_{2} = 39600 –
90P_{x}

(a) What is the total market demand
for airline tickets, as a function of by P_{x}? Keep in
mind that the total demand is the sum of the group demands

(b) Suppose that the price-elasticity
of demand by students, at the price by P_{x}, is -2. What
is the price for the non-student
adult?

(c) At what price is the total revenue (for the entire market) maximized?

Answer #1

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