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Determine fare prices for upcoming spring break season

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Blue Jet airways operating between Tampa and and Daytona trying to determine its fare prices for the upcoming spring break season. In the past, ticket prices have been $75 but the revenue manager is getting worried because of the lack of popularity of seats during that time. In order to increase market share for the route, the marketing department is considering a fare decrease to $60 and estimates price elasticity of demand to be -1.5. The estimated demand (measured in RPM) at a price of $75 is 300,000 for this period of time.

(a) How many seat miles would be demanded at a price of $60?

(b) What would be the effect on the total revenue of the firm if the fare were lowered to $60?

Reference no: EM133077573

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