Discuss factors affecting the Price Elasticity of Demand, Income Elasticity of Demand, and Cross-price Elasticity of...

Discuss factors affecting the Price Elasticity of Demand, Income Elasticity of Demand, and Cross-price Elasticity of Demand for LUX, a five-star resort in the Maldives. Identify any unique amenities of the resort and forms of transportation to the remote islands. Discuss why forecasting is critical for the success of the one island, one resort concept.

Mention the importances of demand (i.e. effective demand, elasticity, inelasticity) and price while tying in with the topic.

At least 200 words (important).

Thanks in advance!

Expert Solution

LUX : 5 star resort in the Maldives

Price elaticity of demand is the responsiveness of the quantity demanded to change in price . Here LUX 's price elasticity is affected by availability of substitutes . In Maldives if there are other similar resorts present which give LUX a stiff competition then LUX would be price elastic in nature .

Income elasticity is the responsiveness of quantity demanded to change in income . If consumer's income rises , they would prefer to go to such a remote location for holidays , hence demand for LUX would rise . This is highly elastic in nature .

Cross price elasticity measures change in quantity demanded in one goods due to price of another . If there is one island , one resort then this is totally inelastic . Since there is no other resort nearby , so change in price cannot affect demand for LUX .

Forecasting is critical since people's change in taste and preference , new tourism spots , change in income etc can affect demand for resorts .

Rahul Sunny answered 2 years ago

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