Ryanair sells two types of airfares, Standard and Flexi plus. There are 6000 consumers: 5000 consumers are family travelers who have higher valuations of a flight: their valuation of a Flexi plus fare is €200, and of Standard fare is €180. The other 1000 are lower valuation millennials: they value a Flexi plus fare for €160, and Standard fare for €150. Note that Flexi plus is considered better by both groups of consumers - each group is willing to pay more for it than for Standard fare. Ryanair cannot directly set different prices for the same fare for different consumers but can set a separate price for each fare. Find the maximal revenue of the airline. Note, if a consumer is indifferent between buying and not, you can assume that the consumer buys.
Ryanair sells two types of airfares, Standard and Flexi plus. There are 6000 consumers: 5000 consumers are family travelers who have higher valuations of a flight: their valuation of a Flexi plus fare is €200, and of Standard fare is €180. The other 1000 are lower valuation millennials: they value a Flexi plus fare for €160, and Standard fare for €150. Note that Flexi plus is considered better by both groups of consumers - each group is willing to pay more for it than for Standard fare. Ryanair cannot directly set different prices for the same fare for different consumers but can set a separate price for each fare. Find the maximal revenue of the airline. Note, if a consumer is indifferent between buying and not, you can assume that the consumer buys.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Ryanair sells two types of airfares, Standard and
Flexi plus. There are 6000 consumers: 5000
consumers are family travelers who have higher
valuations of a flight: their valuation of a Flexi plus
fare is €200, and of Standard fare is €180. The
other 1000 are lower valuation millennials: they
value a Flexi plus fare for €160, and Standard fare
for €150. Note that Flexi plus is considered better
by both groups of consumers - each group is
willing to pay more for it than for Standard fare.
Ryanair cannot directly set different prices for the
same fare for different consumers but can set a
separate price for each fare. Find the maximal
revenue of the airline. Note, if a consumer is
indifferent between buying and not, you can
assume that the consumer buys.
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