Airline Demand Team Exercise

IN-CLASS TEAM EXERCISE:

Koala Airlines plans a non-stop service from Atlanta to Seattle.  A survey determines that

Pass = the number of passengers per month

is a linear function, where

Price = ticket price (in dollars) charged per round-trip flight

The survey finds that 6,000 passengers/month will fly at $500, but only 4,000 will if price is $600.

Answer the following in the space provided: (Show work for questions #4 and #5)

1.  Show that -20 is the slope of the line for the function Pass = b + m Price

        Slope = ΔPass / ΔPrice = (6,000 – 4,000)/(500 – 600) = (+2,000)/(-100) = -20

2.  How many fewer passengers will fly each time that price is raised by $10?

        ΔPass = Slope ΔPrice = (-20)(+10) = -200         or 200 fewer passengers

3.  Find the equation for this function in slope-intercept form.

        Pass         = b + m Price

        6,000         = b + -(-20)(500)

        b         = 6,000 + 10,000         = 16,000

        Pass = 16,000 - 20 Price        is the equation

4.  Using the equation found in question 3, how many passengers will fly monthly if price is $400?

        Pass = 16,000 - 20 (400) = 8,000        

5.  Koala can only carry 10,000 passengers/month even if all flights are full.  Find the Price that sells all the seats without overbooking its flights.

        10,000 = 16,000 - 20 Price

        Price        = (16,000 - 10,000)/20        = 300        or $300 will sell out the seats without overbooking