Question: In a market experiment Disney resorts learned that the quantity demanded decreases from 50,000 rooms to 43,000 rooms when price increases from $100 to $105. The percentage change in quantity is -15.05% when 46,500, the average of the two quantities, is the base. The percentage change in price is 4.88% when $102.5, the average of the two prices is the base.

a. What is price elasticity of demand based on the evidence in hand?

b. What is the optimal price based on the evidence in hand?

c. Suppose that the Marketing Director earns a bonus based on how much profit Disney earns. Which price would she pick: $100 or $105? Why?

d. Suppose that the Marketing Director earns a bonus based on how much profit Disney earns. Would she want to “double down”? That is, if she prefers $105 to $100, would she want to raise price to $110 or if she prefers $100 to$105, would she want to reduce price to $95.

e. Suppose that the Marketing Director earns a bonus based upon how much revenue Disney receives. Which price does she pick: $100 or $105? Why?