An airline transports 800 people per week between two cities. A round trip ticket costs $300. The company wants to increase the price. They estimate that for each $5 increase, 10 passengers will be lost. What ticket price will maximize their income

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13 February, 07:23

An airline transports 800 people per week between two cities. A round trip ticket costs $300. The company wants to increase the price. They estimate that for each $5 increase, 10 passengers will be lost. What ticket price will maximize their income

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Lawson Cohen · Answer 1

A ticket price of $350 would maximize their income.

Explanation:

A round trip ticket costs $300

Number of people per week the airline transports between two cities is 800

Total income per week = $300 * 800 = $240,000

To maximize their income the company should increase the ticket price by $50.

For each $5 increase, 10 passengers will be lost. There are 10 $5 in $50, so the number of passengers that would be lost is 10*10 = 100

If the company loses 100 passengers by increasing the ticket price by $50, the new ticket price would be $350 ($300+$50) and the new number of passengers would be 700 (800 - 100).

Therefore, new income = $350 * 700 = $245,000