Essay
As the manager of a local hotel chain,you have hired an econometrician to estimate the demand for one of your hotels (H).The estimation has resulted in the following demand function:
QH = 2,000 - PH - 1.5PC - 2.25PSE + 0.8POH + 0.01M,where PH is the price of a room at your hotel,PC is the price of concerts in your area,PSE is the price of sporting events in your area,POH is the average room price at other hotels in your area,and M is the average income in the United States.What would be the impact on your firm of:
a.A $500 increase in income?
b.A $10 reduction in the price charged by other hotels?
c.A $7 increase in the price of tickets to local sporting events?
d.A $5 increase in the price of concert tickets,accompanied by an $8 increase in income?
Correct Answer:
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a.ΔQH = (0.01)ΔM = (0.01)(500)= 5.Thus,th...View Answer
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