Homework Answers
Let us first calculate the total revenue in case it charges a price of $307
TR(base case)=307*(367+677)=$320508
Now calculate the total revenue if it charges $297 to vacationers and $317 to business travelers
TR(a)=297*786+317*363=$348513
Now calculate the total revenue if it charges $317 to both vacationers and business travelers
TR(b)=317*475+317*363=$265646
Now calculate the total revenue if it charges $297 to both vacationers and business travelers
TR(c)=297*786+297*371=$343629
Now calculate the total revenue if it charges $317 to vacationers and $297 to business travelers
TR(d)=317*475+297*371=$260762
We observe that TR(a) is maximum.
So, correct option is
to charge $297 to vacationers and $317 to business travelers
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Represent the supply curve and explain why is upward /
downward.
Represent the equilibrium point E and explain why you chose
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