Assignment:
The demand for airline travel is quite sensitive to price Typically, there is an inverse relationship between demand and price; when price decreases, demand in. creases and vice versa. One major airline has found that when the price (P) for a round trip between Chicago and Los Angeles is $600, the demand (D) is 500 passengers per day. When the price is reduced to $400, demand is 1, 200 passengers per day.
- Plot these points on a coordinate system and develop a linear model that relates demand to price.
- Develop a prescriptive model that will determine what price to charge to maximize the total revenue.
- By trial and error, can you find the optimal solution that maximizes total revenue?
Provide complete and step by step solution for the question and show calculations and use formulas.