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    How do you calculate the price using the mark-up rule for Jet Blue Airlines?

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    Jet Blue Airlines has determined that the price elasticity of demand for two customer segments (Coach and Business Class) is -1.35 and -2.50. Based on their expectations of profitability, Jet Blue realizes the price of a Coach seat should be $175 (one way). How much should Jet Blue charge for a Business Class ticket?

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    Solution Preview

    I believe that there may be multiple ways of solving this question, but I think using mark-up makes the most sense to me.

    First, we assume that the marginal costs of sellings a business class and a ...

    Solution Summary

    This solution shows how to determine the price that an airline corporation should charge for coach class and the business class tickets based on the price elasticity of demand for the two customer segments.