The table below shows the demand schedules for Houston–Las Vegas airplane tickets. The center column shows the demand schedule of passengers on business trips, and the right column shows the demand schedule of passengers on vacation trips.Price ($ per ticket)Quantity demanded for business trips (thousands of tickets per year)Quantity demanded for vacation trips (thousands of tickets per year)$281363778$291359669$301355467Suppose that the price charged by airlines is currently $291291.If airlines want to increase their revenue, what would be their best option?to charge $301 to vacationers and $281 to business travelers.to charge $291 to both vacationers and business travelers.to charge $281 to vacationers and $301 to business travelers.to charge $301 to both vacationers and business travelers.to charge $281 to both vacationers and business travelers.

Here, differ prices for airlines is given at which quantity demanded for different types of trips (business and vacation trip).According to the given information, a firm can maximize its profit by increasing the price of a product whose price elasticity of demand is inelastic, while it should decrease the price of a product whose demand in elastic. When talking about price elasticity, it can be seen that when price changes by $10, quantity demand for business trips changes by 4 units, while quantity demand for vacation trip changes by more than 100 units. Therefore, demand for business trips is inelastic and demand for vacation trips is elastic. As a result, firm can maximize its revenue by increasing the price of business trips to $301;and decreasing the price of vacation trip to $281. Hence, the correct option is: to charge $281 to vacationers and $301 to business travelers.

Answered: schedules for Houston–Las Vegas…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

The table below shows the demand schedules for Houston–Las Vegas airplane tickets. The center column shows the demand schedule of passengers on business trips, and the right column shows the demand schedule of passengers on vacation trips.

Price ($ per ticket)	Quantity demanded for business trips (thousands of tickets per year)	Quantity demanded for vacation trips (thousands of tickets per year)
$281	363	778
$291	359	669
$301	355	467

Suppose that the price charged by airlines is currently $291291.

If airlines want to increase their revenue, what would be their best option?

to charge $301 to vacationers and $281 to business travelers.

to charge $291 to both vacationers and business travelers.

to charge $281 to vacationers and $301 to business travelers.

to charge $301 to both vacationers and business travelers.

to charge $281 to both vacationers and business travelers.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions