Question

Each month, an airline sells 1,500 business-class tickets from London to Paris at $200 a ticket, and 6,000 economy-class tickets at $80 a ticket. Use this information to construct the demand curves of business travelers and tourists respectively, if it is given that the demand curves for both groups are linear and that the marginal cost of a ticket is constant at $50.

Answer 1

Answer:

For business travellers Qb = 3,500 - 10pb

P = 350 - .1Q

And ,for tourists it is Qt = 22,000 - 200 pt

P = 110-Q ÷ 200

Explanation:

Let us assume the demand curve be $Q_i = a_i - b_i p_i$

Also at the equilibrium point, MR = MC

So

$\frac{a_i - 2Q_i}{b_i } = 50$

Now solving these equations

$a_i = \frac{Q_i (2p_i - 50)}{p_i - 50} \\\\ b _i = \frac{Q_i }{p_i - 50}$

Now putting these values

So,

For business travellers Qb = 3,500 - 10pb

P = 350 - .1Q

And ,for tourists it is Qt = 22,000 - 200 pt

P = 110-Q ÷ 200

Hence, these are the answers that are shown above