A city government decides to tax hotel rooms to raise money. Before the tax, 1000 rooms were typically rented out per month. After the tax, the number of rooms rented per month falls to 900, the amount paid by hotel guests rises to $130 and the amount received by sellers falls to $110 per room. If the price per hotel room was $100 per night before the tax, which of the following can we conclude? The supply of hotel rooms is more price elastic than is the demand The demand for hotel rooms is more price elastic than is the supply The supply of hotel rooms after the tax is greater than the demand for hotel rooms The demand for hotel rooms after the tax is greater than the supply of hotel rooms We cannot conclude any of the options given with only the information provided.
A city government decides to tax hotel rooms to raise money. Before the tax, 1000 rooms were typically rented out per month. After the tax, the number of rooms rented per month falls to 900, the amount paid by hotel guests rises to $130 and the amount received by sellers falls to $110 per room. If the price per hotel room was $100 per night before the tax, which of the following can we conclude? The supply of hotel rooms is more price elastic than is the demand The demand for hotel rooms is more price elastic than is the supply The supply of hotel rooms after the tax is greater than the demand for hotel rooms The demand for hotel rooms after the tax is greater than the supply of hotel rooms We cannot conclude any of the options given with only the information provided.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Transcribed Image Text:A city government decides to tax hotel
rooms to raise money. Before the tax,
1000 rooms were typically rented out per
month. After the tax, the number of
rooms rented per month falls to 900, the
amount paid by hotel guests rises to $130
and the amount received by sellers falls
to $110 per room. If the price per hotel
room was $100 per night before the tax,
which of the following can we conclude?
The supply of hotel rooms is more price
elastic than is the demand
The demand for hotel rooms is more
price elastic than is the supply
The supply of hotel rooms after the tax is
greater than the demand for hotel rooms
The demand for hotel rooms after the tax
is greater than the supply of hotel rooms
We cannot conclude any of the options
given with only the information provided.
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