Question

Management of AG Travel and Tour has identified two groups of individuals that would be interested...

Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is not able to identify members of either group, it does know that each group values the components of the package differently. Assuming there are an equal number of members in each group and that the total membership in each group is a single individual. If the marginal cost of providing the service (room and board and/or entertainment) to each group is GHC 1000.
i. How much will the hotel charge members of each group for the vacation package if it could identify the members in each group?
ii. How much will the profit for AG Travel and Tour be?
iii. Since AG Travel and Tour is not able to identify members of each group, what price should it charge for each product?
iv. What will be the profit for AG Travel and Tour in the case of (iii) above?
v. If AG Travel and Tour wants to charge a package price, what is the highest price it can charge?
vi. What profit will AG Travel and Tour make if it charges the package price found in (v) above?

Homework Answers

Answer #1

i. The price charged when the firm is able to identify members of the group should be based upon each of the group's maximum willingness to pay for each respective service. Consequently, for room and board, the price for Group 1 should be 2500 and for Group 2 it should be 1800. Similarly, for entertainment, the price for Group 1 should be 500, and that for Group 2 should be 750.

ii. The profit in such a case would be 2500 + 1800 + 500 + 750 - 1000*4 = 1550

iii. The price charged when the firm is unable to identify members of the group should be based upon the lowest of the maximum willingness to pay for each group in each respective service. Consequently, for room and board, the price should be 1800. Similarly, for entertainment, the price should be 500.

iv. The profit in such a case would be 1800 + 1800 + 500 + 500 - 1000*4 = 600

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Management of AG Travel and Tour has identified two groups of individuals that would be interested...
Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is...
Management of AG Travel and Tour has identified two groups of individuals that would be interested...
Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and Tour is...
Question One Management of AG Travel and Tour has identified two groups of individuals that would...
Question One Management of AG Travel and Tour has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is GHC 2500 and for entertainment is GHC 500. For group 2, the maximum amount they are willing to pay for room and board is GHC 1800 and for entertainment is GHC 750. Although AG Travel and...
KLM has identified two groups of individuals that would be interested in the vacation package consisting...
KLM has identified two groups of individuals that would be interested in the vacation package consisting of room and board and/or entertainment. The maximum amount that group 1 is willing to pay for room and board is $2500 and for entertainment is $500. For group 2, the maximum amount they are willing to pay for room and board is $1800 and for entertainment is $750. Although KLM is not able to identify members of either group, it does know that...
3. ZipCar is the only car sharing company in Burlington. There are two kinds of car...
3. ZipCar is the only car sharing company in Burlington. There are two kinds of car users in Burlington: frequent users (F-types) and infrequent users (I-types). The weekly demand for car trips for a representative F-type is qF = 10 – p while the weekly demand for car trips for a representative I-type is qI = 8 – p. Suppose there are ten F-types and ten I-types in Burlington. ZipCar estimates that the marginal cost of each car trip is...
Subject: Human Resource Management Main question: Which benefit plans would you choose, and which wouldn't you...
Subject: Human Resource Management Main question: Which benefit plans would you choose, and which wouldn't you choose and give reasons why you would or would not want a benefit that were used in making the benefit selections (specially at at entry level making $30000). PROCEDURES: Assume that you recently graduated from college and are just starting a new job at a large firm. You will be receiving a starting net pay (net of all taxes and mandatory deductions) of $30,000....
Project Integration Management Questions Only A team member notifies you, after the fact, that she has...
Project Integration Management Questions Only A team member notifies you, after the fact, that she has added extra functionality to the project. There was no impact on the cost or schedule. What should be done as a result of this change? Make sure marketing is aware of the change. Implement change control processes to track the change. Inform the customer. Understand what functionality was added. You are having difficulty getting a project underway. You have not been able to get...
1. Summarize in a few sentences what Ayers found about pricing strategies in car markets. 2....
1. Summarize in a few sentences what Ayers found about pricing strategies in car markets. 2. Do you think that this is a profit maximizing strategy? Do you think this is an appropriate and reasonable strategy for businesses to undertake it it increases their profits? 3. Can you think of other goods or services that could be - or are - priced the same way? Check out the article on discrimination in coffee shops "Waiting for Good Joe" for some...
Discuss ethical issues that can be identified in this case and the mode of managing ethics...
Discuss ethical issues that can be identified in this case and the mode of managing ethics Enron finds itself in this case. How would you describe the ethical culture and levels of trust at Enron? Provide reasons for your assessment. THE FALL OF ENRON: A STAKEHOLDER FAILURE Once upon a time, there was a gleaming headquarters office tower in Houston, with a giant tilted "£"' in front, slowly revolving in the Texas sun. The Enron Corporation, which once ranked among...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT