Question

As the manager of a golf resort, you want to increase the number of tee times sold by 10 percent. Your staff economist (and junior caddy) has determined that the price elasticity of demand for tee times is –1.5. To increase sales by the desired amount, how much should you decrease the price of a tee time in percentages?

Answer 1

Answer:

The price of tee times needs to be decreased by 6.67%.

Explanation:

The manager wants to increase the number of tee times sold by 10 percent.

The price elasticity of demand for tee times is –1.5.

Percentage change in price of tee times to increase the demand by 10%

Price elasticity of demand = $\frac{\% \Delta Q}{\% \Delta P}$

-1.5 = $\frac{10 \%}{\% \Delta P}$

$\% \Delta P = \frac{10}{-1.5}$$\% \Delta P = -6.67 \%$