Question

n airline company charges the following baggage fees: $25 for the first bag and $35 for the second (i.e., you pay $60 if you check two bags). Suppose 54% of passengers have no checked luggage, 34% have one piece of checked luggage and 12% have two pieces. About how much revenue should the airline expect for a flight of 120 passengers

Answer 1

The airline should expect a revenue of $1,884 for a flight of 120 passengers

Explanation:

For each passenger:

54% of passengers have no checked luggage, that is, 54% probability of no revenue.

34% have one piece, that is, 34% probability of $25 revenue.

12% have two pieces, that is, 12% probability of $60 revenue.

The expected revenue for a single passenger is:

`E = 0.54*0 + 0.34*25 + 0.12*60 = 15.7`

For 120 passengers

15.7*120 = $1,884

The airline should expect a revenue of $1,884 for a flight of 120 passengers