A Train Company Is Considering Applying Yield Management Principles to Its

question 71

Essay

A train company is considering applying yield management principles to its ticket sales. Suppose that there is no variable cost in the operation, only a fixed cost to run each train. The company decides that a student ticket will sell for half the cost of a business ticket. If demand for the business tickets is given by 50 - 3x where x is the sales price of a business ticket and demand for student tickets is given by 70 - y² where y is the price of a student ticket how much should the company charge for tickets to maximize revenue?

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Definitions:

Interest Rate

The fee a lender imposes on a borrower for asset usage, represented as a proportion of the principal amount.

Note

An instrument of debt that specifies the terms under which monies are borrowed and must be repaid, including interest rates and due date.

Notes Receivable

Written promises for amounts to be received within a certain period, recognized as assets on the balance sheet.

Contingent Liability

A potential obligation that depends on a future event arising from past transactions or events.