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Problem Set Three

This document provides a problem set with questions about business economics concepts like demand elasticity and how it applies in different contexts. It includes questions about how shorter booking windows might impact hotel room rates and revenues over time. It also asks about examples like how a natural disaster affecting banana crops or the holiday season impacting toy demand would influence demand curves and producer responses. Additional questions analyze case studies and data on factors like Super Bowl ticket markups, water usage impacts of price increases, and how price elasticities vary between user groups and trip types.

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Sunil Pipaliya
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83 views

Problem Set Three

This document provides a problem set with questions about business economics concepts like demand elasticity and how it applies in different contexts. It includes questions about how shorter booking windows might impact hotel room rates and revenues over time. It also asks about examples like how a natural disaster affecting banana crops or the holiday season impacting toy demand would influence demand curves and producer responses. Additional questions analyze case studies and data on factors like Super Bowl ticket markups, water usage impacts of price increases, and how price elasticities vary between user groups and trip types.

Uploaded by

Sunil Pipaliya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MBA439 Business Economics

Trimester 3, 2021
Problem Set Three

1. Timeframe is important in the hotel industry when it to comes booking windows. Leisure
travelers aren’t booking as far in advance as they used to, and groups are also booking
closer to their arrival date.

a. If booking windows are getting shorter, how does it change demand elasticity for
room rates?
b. How can hotel management maximize revenues, knowing that elasticity of demand
for hotels rooms are changing continuously? Consider the argument that
accommodation is advertised online and on more than one platform.

2. When a tropical cyclone ruined banana crops in Queensland, the price of bananas rose
from $1 a kilogram to $2 a kilogram. Banana growers sold fewer bananas, but their total
revenue remained unchanged.

a. By how much did the quantity of bananas demanded change?


b. Is the demand for bananas from Queensland elastic or inelastic?

3. In the holiday season, people have to buy toys and gifts for loved ones. How does this
impact demand curves? How are firms expected to respond?

4. Case Study: Read the story on “Super Bowl XLVIII Pricing: A Lesson in Demand
Elasticity”. Why are organizers able to increase mark ups for Super Bowl tickets? What
is fundamentally driving the mark ups?

5. Single family residence water demand in the Las Vegas Valley report a price elasticity of
-0.34 (Rollins, Lott and Tchigriaeva, 2014). What will be the impact on water
consumption if water rates increase by 10%?

1
6. See table below which provides price elasticities of demand for water in Las Vegas
Valley (Las Vegas Valley Water District Price Elasticity Study, 2016). Residential refers
to single family (individual residences) and multi family (apartment buildings,
condominiums and manufactured home parks) water users. Commercial refers to
manufacturing, retail and other commerce-based water users.
Group Price Elasticity
Single Family Residences -0.34
Multi Family Residences - -0.68
Commercial -0.61

a. Why do the price elasticities of demand differ by groups (as shown)?


b. Why is it important for utility companies (water and electricity) to estimate price
elasticities of demand?

7. Case Study: Research shows that type of Trip and Traveler elasticities vary (Victoria
Transport Policy Institute, 2019). Argue why elasticities tend to vary by type of trip and
traveler:

a. Commercial (business) travel tends to be less price sensitive than personal travel.
b. Commute trips tend to be less elastic than shopping or recreational trips.
c. Higher income travelers tend to be less price sensitive than lower income travelers.
d. Weekday trips may have very different elasticities than weekend trips.
e. Urban peak period trips tend to be price inelastic.

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