Q1 (A) Construct the demand and supply curves for this air transportation market. Q1 (B) Determine the equilibrium price charged and the number of seats sold per day, and the resulting revenues of the company. Q1 (C) Suppose that the airline company decides to connect city A with city B through an indirect flight service via a regional hub at city C. Discuss the implications of this decision from the company’s and the customers’ viewpoin
An airline company determines the price of a seat on a particular route between
city A and city B to be
p = 200 + 0.02n,
where p is the airfare price in euro and n is the number of airplane seats sold per
day.
The travel demand for this route by air has been found to be
n = 4700 – 20p
Q1 (A)
Construct the demand and supply
Q1 (B)
Determine the
and the resulting revenues of the company.
Q1 (C)
Suppose that the airline company decides to connect city A with city B through an
indirect flight service via a regional hub at city C. Discuss the implications of this
decision from the company’s and the customers’ viewpoin
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