How to Increase Tee Time Sales at a Golf Resort
Question:
To increase sales by the desired amount, how much should you decrease the price of a tee time in percentage terms?
(a) -6.67%
(b) -15.5%
(c) -8%
(d) -20%
Answer:
The price of tee-time should be reduced by 6.67%.
Explanation: The price elasticity of demand for tee times is -1.5. The manager wants to increase the number of tee times sold by 10%. The price elasticity of demand shows the change in quantity demanded due to a change in the price level. It is the ratio of the percentage change in quantity demanded and percentage change in price. Price elasticity = [tex]\frac{\% \Delta Q}{\% \Delta P}[/tex]
- 1.5 = [tex]\frac{10 \%}{\% \Delta P}[/tex]
[tex]\% \Delta P = \frac{10}{- 1.5}[/tex]
[tex]\% \Delta P = - 6.67 \%[/tex]
Final answer: To increase sales by 10% at a golf resort, the price of a tee time should be decreased by approximately 6.67%.
Explanation: To calculate the percentage amount by which you need to decrease the price of a tee time to increase sales by 10%, you can use the formula: Percentage change in sales = Price elasticity of demand × Percentage change in price. Here, the percentage change in sales is 10% and the price elasticity of demand is -1.5. Let's assume the percentage change in price is x%. Plugging the values into the formula, we get: 10% = -1.5 × x%. Solving for x, we find that x is approximately -6.67%. Therefore, you should decrease the price of a tee time by 6.67% in percentage terms to increase sales by 10%.