Suppose an airline sells air tickets to two types of customer – business travelers and vacation travelers. Their estimated demand elasticities are -2.5 and -4.0 respectively. Suppose the marginal cost is constant at $240, and the services provided to the two types of customer are similar.  Calculate the fares the airline should charge on the air tickets sold to the respective types of customers. Show your calculations.

Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter9: Monopoly
Section: Chapter Questions
Problem 3SQP
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Suppose an airline sells air tickets to two types of customer – business travelers
and vacation travelers. Their estimated demand elasticities are -2.5 and -4.0
respectively.
Suppose the marginal cost is constant at $240, and the services provided to the
two types of customer are similar.
 Calculate the fares the airline should charge on the air tickets sold to the
respective types of customers. Show your calculations.

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