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Question: 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.
a. Plot these points on a coordinate system and develop a linear model that relates demand to price.
b. Develop a prescriptive model that will determine what price to charge to maximize the total revenue.
c. By trial and error, can you find the optimal solution that maximizes total revenue?
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