You have been hired by a hotel chain to manage the hotel chain. The first thing you do is hire an econometrician to estimate the demand for one of the hotels you are responsible for (H). The econometrician comes up with a demand function that looks like the following: QH = 3,000 - 2PH - 3.5PC - 1.75PSE + 0.6POH + 0.02M. In this case, PH refers to the price of a room at hotel H, the price of concerts in the area where the hotel is located is given by PC, while the price of other sporting events in the same area is given by PSE. Meanwhile, the average room price at other hotels in the same area is given by POH. Lastly, M is the average income in the U.S., which you estimate is also a proxy for the income of your average potential customer. With this information in hand, please calculate the impact that the following events will have on your firm:
a. Average income M, increases by $600?
b. Assume that a hotel that competes against you in the area reduces its room price by $10.
c. What if the price of event tickets in your area increases by $9?
d. What if there is a $6 increase in the price of concert tickets while at the same time income increases by $10?