An Applied Problem in Elasticity

(a) What was the average (nominal) room rate in 1988? (b) What was the average (nominal) room rate in 1989? (c) What was the occupancy rate in 1989?

(d) The 1989 occupancy rate corresponded to how many room nights actually purchased by guests, according to the article? (e) Given your earlier answer, what was the total number of room nights available in 1989?

(f) What was the occupancy rate in 1988?

(g) If no hotels closed and no new hotels were opened between 1988 and 1989, what was the number of room nights purchased by guests in 1988?

(b) Using your earlier answers, estimate the elasticity of demand for hotel rooms in Philadelphia. Do not try to adjust for inflation.

(i) If the goal of Philadelphia hoteliers is to maximize revenues, should they raise or lower rates for 1990?

**The news article is from the Philadelphia Inquirer, 1990.**