2. Pricing and surplus Aa Aa Consider the market for hotel rooms in London of Au

Question

2. Pricing and surplus Aa Aa Consider the market for hotel rooms in London of August of 2011, a year before the 2012 Olympics are set to take place. The demand curve represents demand for actual hotels stays during that period (that is, it does not include current bookings for stays in the future), and the supply curve is assumed to be fixed in the short-run by the number of hotels currently in the market. As the article describes, London hotels are also booking reservations for the Olympic period, and therefore they must consider what the market will look like in 2012 to determine what rates to charge. Adjust the following graph to reflect the hoteliers prediction of what the demand for hotel rooms will loo like during the August of 2012. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just try again and drag it a little farther. PRICE [Average Price of Room per Night) 1800 Supply 1500 1200 600 300 Demand 200 400 600 800 1000 1200 QUANTITY (Thousands of Hotel Rooms

Explanation / Answer

Answer1- This would cause a excess demand of roughly available rooms during the olympics.

            b- The charter is an example of a imperfect competition (oligopoly market).

           c- Recall from the article the most hotels' 2012 rates ended up price 900 the usual August rates

The statement which described best is - price controls are difficult to maintain in the face of excess demand

Answer 2- 1. Highest quantity.

                 2. Lowest price.

                 3. Highest price.

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