Hi Deepa,

i agree with Denis. Nothing really seems off here...this is a classic price breakeven problem.

To determine the right price, we have to figure out how much is lost/gained per unit times the total change in units sold.

Most goods have normal price elasticities (i.e. price inversly related to quantity demanded).

That said, watch out for price inelasticity AND inversed elasticity. The classic example for the first one would be addictive items such as drugs (I'll pay any amount to get some), and the classic example for the second is luxury goods (as prices rise I actually want it more, as it's a status symbol)

Another thing to consider is the value of the elasticity. If its close to 0, it's quite inelastic (i.e. change in price does not lead to a change in demand). If its above 1, a change in price leads to a large change in demand. 

As the elasticities are -0.5 and -2, an increase in prices will cause demand to drop (which is what we see in the case).  The question is: which drops faster?

As the frequent travellers are almost inelastic (-0.5), demand changes slowly with changes in price. So you'll need to drop the price a lot (by 30) in order to raise demand to 990. At a price of 120, you have maximum demand but far less revenue (42.76 million) Collecting 30 € less per person is not compensated by having full occupancy.

In the case of the explorers, the elasticity is -2. (abs(-2) = 2 which is greater than 1), which suggests that it's highly sensitive to price changes. Therefore by dropping price a little, you quickly gain many more clients. So in this case although you collect less per client, because you have more clients, you collect more on the whole.