Suppose the elasticity of demand for your parking lot spaces, which are located in a downtown...
Suppose the elasticity of demand for your parking lot spaces, which are located in a downtown business district, is –3.6, and the price of parking is $9 per day. Additionally, suppose that your MC is zero, and your capacity has been 80% full at 9 AM each day over the last month.
Since demand is (elastic, inelastic, unit elastic) , and the lot is below capacity,(increasing, leaving price unchanged, decreasing price) is the optimal pricing strategy.
Homework Answers
In case of elastic demand, there is negative relationship between price and total revenue.
In case of inelastic demand, there is positive relationship between price and total revenue.
Since demand is elastic and the lot is below capacity decreasing price is the optimal strategy.
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