Mount Mogul ski resort - downward sloping graph
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The graph is listed in the attachment for these questions.
4)Assume that the downward sloping line in the graph on the next page represents the amount of money that a typical snowboarder /skier visiting Mount Mogul ski resort on a typical day would be willing to pay for successive lift trips up the mountain if lift trips were charged by the individual ride and all day passes were not available. (see next page).
a) Why does the typical skier's WTP (willingness to pay) schedule slope downward?
b)Suppose all skiers at Mount Mogul had the same WTP schedule as this skier and the resort operator charged $5 per ride up the lift. What is the elasticity of demand at this price? Show your calculations.
c)Is $5/lift ride the per ride price which maximizes revenue? Explain , using the elasticity concept in your answer.
d)show (or clearly describe) the area on the graph that would correspond to consumer's surplus earned by the typical boarder/skier with this payment scheme. Explain your answer briefly.
e)If the ski-resort owner eliminates the possibility of buying single ride lift tickets and instead sells only an all-day lift pass, entitling the skier/boarder to as many trips up the mountain as desired, what is the maximum price that could be charged without discouraging the skier from coming to Mount Mogul. ?
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Solution Summary
This problem solves the Mount Mogul ski resort case. It can be used as a good exercise to learn concepts of consumer surplus, revenue maximization, willingness to pay, etc.
Solution Preview
See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks
4) Assume that the downward sloping line in the graph on the next page represents the amount of money that a typical snowboarder /skier visiting Mount Mogul ski resort on a typical day would be willing to pay for successive lift trips up the mountain if lift trips were charged by the individual ride and all day passes were not available. (see next page).
a) Why does the typical skier's WTP (willingness to pay) schedule slope downward ?
The skier would be most excited for the first ride and will have the maximum utility from that ride. Therefore, the willingness to pay for ...
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