Question

Cheap Gas Fuels Summer Rush AAA is projecting 700,000 more than last year will travel on the Memorial Day weekend. Low gasoline prices are fueling the rush. But travelers pay more for hotels. In Miami hotel prices are up 23 percent Source: USA Today, May 27, 2016

Answer 1

(i) According to the microeconoma theory: - Hotel room poice price want the w. Gosoline ne pele price, As, lata Pura relating price of hotel (oks stthe restive price increases, and also due to people's push, no. of people & and Ansonfine the relative price increases. So a notel Revenue = (PH94) e increases. Tin This answer can be given from supply Iemand analysis. As the no. of rooms in a hotel is fixed in the Shont non supply canne is vertical. But there is increase in stand for hot rooms due to fall in casoline paire so reduction in flight pruers. (price). So feed the demand curre shifts upwand. Comaphically Supply of hotel room 10 Cincorect demands -Do Cinitially

and hence, the price of hotel increases to maintin dement and supply ef uilibrium as in the earlies egur price the economy was. not in ea by so hur (hotel room price) increases to by 23.1. so as to compensate the demand