Chapter 1, Problem 16PE

The demand for airline travel is quite sensitive to price. Typically, there is an inverse relationship between demand and price, when price decreases, demand increases and vice versa. One major airline has found that when the price (P) for a round trip between Chicago and Los Angeles is $600, the demand (D) is 500 passengers per day. When the price is reduced to $400, demand is 1,200 passengers per day

1. Plot these points on a coordinate system and develop a linear model that relates demand to price.
2. Develop a prescriptive model that will determine what price to charge to maximize the total revenue.
3. By trial and error, can you find the optimal solution that maximizes total revenue?