Question

According to an article in the Wall Street​ Journal, unlike​ airlines, even elite hotels​ don't have sophisticated systems that can react quickly to changes in demand. Even if they​ could, many hoteliers say people​ don't respond that much to lower rates.​ 'We've tested​ this, cutting our rates by​ $50 [per​ night], and we​ didn't see an appreciable response in​ occupancy,' says Jim​ Schultenover, a vice president for RitzminusCarlton. ​Source: Jesse​ Drucker, "In Times of Beltminus​Tightening, We Seek Reasonable​ Rates", Wall Street Journal​, April​ 6, 2001. Based on the information​ above, the demand for hotel rooms is?

Answer 1

Answer:

The demand for hotel rooms is inelastic

Explanation:

An inelastic demand is the one that is not very sensitive to price changes (the price elasticity of demand is less than one). In this case, even though the RitzminusCarlton hotel cut they rates by $50 per night, they did not see a significant response in occupancy. It is not perfectly inelastic because in that case the RitminusCarlton hotel would not have seen any changes in occupancy (they saw a response in occupancy, but it was not meaningful). In the demand and supply graph, an ineslatic demand curve is steeper than the normal one. The more inelastic the more steeper the curve.