Final answer:
To calculate the impact on net income, calculate the change in revenue and costs. Decreasing ticket prices by 10% results in a new ticket price of $90. With a 25% increase in passenger flights, both revenue and total variable costs will increase. Net income can be calculated by subtracting the new costs from the new revenue.
Step-by-step explanation:
To calculate how net income would be impacted by the change, we need to understand the relationship between ticket prices, passenger flights, and total variable costs.
Let's assume that the original ticket price is $100. If ticket prices are decreased by 10%, the new ticket price would be $90. Given that ticket prices are directly related to passenger flights, a 25% increase in passenger flights would result in a total number of flights being 125% of the original value.
Since total variable costs increase by the same percentage as passenger flights, it means that total variable costs would also be 125% of the original value.
To calculate the change in net income, we need to consider the impact of the change in revenue and costs. Net income is equal to revenue minus costs.
The original revenue can be calculated by multiplying the original ticket price by the original number of flights. The new revenue can then be calculated by multiplying the new ticket price by the new number of flights.
The original costs can be determined by multiplying the original variable costs per flight by the original number of flights. The new costs can then be calculated by multiplying the new variable costs per flight by the new number of flights.
Finally, we can calculate the change in net income by subtracting the new revenue from the new costs.