question archive The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues
The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues
Subject:EconomicsPrice:2.88 Bought3
The Interior Department recently announced that it will increase the entrance fees at Yellowstone National Park in order to increase park revenues. The Interior Department must believe that:
A. Park goers are very responsive to price changes.
B. The demand for park services is elastic.
C. The percentage increase in fees will be greater than the percentage decrease in the number of park visitors.
D. Demand is unitary elastic, and thus the number of visitors will NOT decrease.
With explanation why?
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Option C The percentage increase in fees will be greater than the percentage decrease in the number of park visitors is correct
The reason is that the Interior Department will increase the entrance fees at Yellowstone National Park only if the price elasticity of demand for the park is inelastic or relatively inelastic. It means the percentage increase in the entry fees will be greater than the percentage decrease in the number of park visitors. If the Interior Department assumes the price elasticity of demand for the Park to be elastic, it will not increase the price as increasing the price will reduce the total revenue.
