1. Business
  2. Economics
  3. also all of the following are true regarding the price...

Question: also all of the following are true regarding the price...

Question details


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: OH-2,000 -PH-1.5PC2.25PSE+0.8PHo.01M where PH is the price of a room at your hotel, Pcis 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 on demand of hotels in the area: (6points) a. A $500 increase in income? b. A $10 reduction in the price charged by other hotels? c. A $5 increase in the price of concert tickets, accompanied by an $8 increase in income?


Also, all of the following are true regarding the price elasticity of demand except which one?
a) It measures how much the demand curve shifts in response to a change in price
b) It measures the movement along the demand curve in response to a change in price
c) It is measured in percentage changes
d) It measures how much the quantity demanded changes in response to a change in price

Can you please show how to use the formula given to figure the answers? That is where I am most confused.

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution