Question

Assume that you own a small boutique hotel. In an attempt to raise revenue you reduce your rates by 20 percent. However, your revenue falls. What does this indicate about the demand for your boutique hotel rooms

Answer 1

Answer:

Demand is inelastic

Explanation:

Demand is inelastic, means that the demand of the buyer does not change as the price varies or changes.

For example, the price rises by 15% and the demand falls by 1%, which is said to be that the demand is inelastic.

So, in this case, the boutique hotel, tries to increase the revenue through decreasing the rates through 20%, but the revenues decreases. Therefore, this situation is that the demand of the boutique hotel is inelastic.