Calculate point price elasticity of demand for each customer

Reference no: EM13214093

The Fun-Land Amusement Park is a 40-acre fun park full of rides, shows, and shops. Fun-Land's marketing department segments its customer base into two parts: local patrons and tourists. Fun-Land assumes local patrons are more price sensitive than out-of-town tourists. Yearly demand and marginal revenue relations for overnight lodging services, Q, are as follows: Locals PL = $40 - $0.0005QL MRL = $40 - $0.001QL Tourists PT = $50 - $0.0004QT MRT= $50 - $0.0008QT Marginal cost is constant at $20 per unit.

A) Assuming the company can discriminate in price between locals and tourists customers calculate the profit-maximizing price, output, and total profit contribution levels.

B) Calculate point price elasticity of demand for each customer class at the activity levels identified in part A.

C) Given a fixed cost of $150,000 what is the firm's level of profit.

Reference no: EM13214093

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