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demand function

As the manager of a local hotel chain, you have hired an econometrician to estimate the demand of one of your Hotels (H). The Estimation has resulted in the following demand function:

Q (H) = 2,000 - (PH) - 1.5 (PC) - 2.25P ( P SE) + 0.8 (P OH)+ .01 (M)

Where the following to solve: P= Price
(H) is Hotels, (PH) is the price of the room at your hotel, (PC) is is the price of concerts in your area, (SE) price of sporting events in your area, (P OH) is the average room price of at other hotels in your areas, and (M) is the average of income in the United States.

What would be the impact on your firm of:
1. A $500.00 increase in income?
2. A $10.00 reduction in the Price charged by other hotels
3. A $7.00 increase in the price of tickets to local sporting events?
4. A $5.00 increase in the price of concert tickets, accompanied by an $8.00 increase in income?

Any help greatly appreciated. Thanks!

Solution Preview

What would be the impact on your firm of:
1. A $500.00 increase in income?
Look at the coeffcient of M, it is 0.01, so the increase in income by $500 will lead to an increase in demand by 500*0.01=5

2. A ...

Solution Summary

Find demand function.

$2.19