Question
In: Accounting
Sox Shogun Hotel sold 2,000 rooms during the past month at an ADR of $70.00. During...
Sox Shogun Hotel sold 2,000 rooms during the past month at an ADR of $70.00. During this month, the ADR is increased by $7.00 and the total number of rooms sold is 1,900. What is the price elasticity of demand? What is the effect of the decrease in the #of rooms to the total room revenue for the Sox Shogun Hotel during this month?
Group of answer choices
$5,600 decrease
$6,300 increase
$6,300 decrease
$5,600 increase
Solutions
Expert Solution
Sox Shogun Hotel sold 2,000 rooms during the past month at an ADR of $70.00. During this month, the ADR is increased by $7.00 and the total number of rooms sold is 1,900
Percentage change in quantity demanded = 100/2,000
= 5%
Percentage change in price = 7/70
= 10%
price elasticity of demand = Percentage change in quantity demanded/Percentage change in price
= 5%/10%
= 0.5
Total room revenue in the previous month = Number of rooms sold x ADR
= 2,000 X 70
= $140,000
Total room revenue in the Current month = Number of rooms sold x ADR
= 1,900 X 77
= $146,300
Increase in total room revenue = 146,300 - 140,000
= $6,300
total room revenue for the Sox Shogun Hotel will increase by $6,300 during this month
Second option is the correct option
ekkarill92 answered 2 years agoRelated Solutions
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