Question

2.38 Baggage fees: An airline charges the following baggage fees: $25 for the first bag and $30 for the second. Suppose 54% of passengers have no checked luggage, 30% have only one piece of checked luggage and 16% have two pieces. We suppose a negligible portion of people check more than two bags.

Answer 1

The average baggage-related revenue per passenger is $16.30 per passenger.

Expected value

Expected value formula: x×p(x)

First step

No passenger=0×.54

No passenger=0

Second step

One checked luggage for first bag=.30×$25

One  checked luggage for first bag=$7.50

Third step

Two piece  for the first and second bag=.16×($25+$30)

Two piece  for the first and second bag=.16×$55

Two piece  for the first and second bag=$8.80

Last step

Expected value=$7.50+$8.80

Expected value=$16.30

Therefore the average baggage-related revenue per passenger is $16.30 per passenger.

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