Sal’s satellite company broadcasts TV to subscribers in Los Angeles and New York. The demand functions for each of these two groups are PNY = 150 – 3*QNY or QNY = 50 – 1/3 * PNY PLA = 120 - 3/2 * QLA or QLA = 80 – 2/3 * PLA where Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by C = 1000 + 30*Q and MC = 30 where Q = QNY + QLA. Note that MRNY = 150 – 6*QNY MRLA = 120 – 3*QLA
Draw the graphs of both the NY and LA markets and determine the optimum prices and quantities.