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You run a hotel and you have determined that if you lower the price of your...

You run a hotel and you have determined that if you lower the price of your rooms 15% you will be able to rent 20% more rooms each month.
1a)What is your price elasticity of demand for hotel rooms?

1b) If you want to maximize your revenue from renting out hotel rooms, what, if any changes should you make to the price?

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Answer #1

Here we have calculated the value of price elasticity of demand is greater than 1 which shows that price and revenue will go in the same direction

So if we want to maximize the revenue for renting out the hotel rooms we need to maximize the price

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