Compute the percentage change in price and quantity

Assignment Help Business Economics

Reference no: EM1361346

Market Demand and Supply equations for lodging at a Bed & Breakfast are as follows:
Qd = 200 - P
Qs = 125 (a fixed number of rooms are available)

a. Calculate the equilibrium room price.

b. At this equilibrium price, what is the level of Sales revenue?

c. If this particular lodge were to add one more room (Qs' = 126), what would be the effect on market price? How would this change affect Sales Revenue? Given these results, would you conclude that demand is Price Elastic or Price Inelastic?

d. Compute the percentage change in price and quantity (%ΔP, %ΔQd) by adding this one room. Calculate the Price Elasticity of Demand.

e. If the goal of the B & B owners is to increase Sales revenue, should they add rooms or eliminate some of the rooms currently available.
Please explain all your answers.

Reference no: EM1361346

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