• Join over 1.2 million students every month
• Accelerate your learning by 29%
• Unlimited access from just £6.99 per month
Page
1. 1
1
2. 2
2
3. 3
3

# Hotel prices during London Olympics 2012 - Microeconomics IA Commentary

Extracts from this document...

Introduction

ï»¿Internal Assessment Microeconomics Word count: 727 Title: Hotel prices are hiked by 300% during the Olympics with some owners pocketing an extra £5,000 Source: The Daily Mail http://www.dailymail.co.uk/news/article-2176799/London-2012-Hotels-prices-hiked-300-Olympics-owners-pocketing-extra-5-000.html This article discusses how the expected demand for hotel rooms in London due to the 2012 Olympics has prompted hotel suppliers to increase their rates in an attempt to earn greater profits. Price elasticity of demand is a measure of how responsive demand for a product is to a change in price. It is calculated by dividing the percentage change in quantity demanded of the product by the percentage change in price. There are several determinants of PED, such as the availabilty of close substitutes and the necessity of the product. The more similar alternatives there are for a product, the greater the price elasticity, as consumers could simply switch to a substitute good if the price of the original product increased. ...read more.

Middle

Originally, the product was sold at price P1 with quantity Q1 demanded. After producers decided to increase the price to P2, quantity demanded fell to Q2. The value of the increase in price is greater than the value of the decrease in quantity demanded; producers are able to earn greater profit overall. There are two main reasons for the elastic demand of hotels in London. Firstly, those who are most likely to be affected by the rising hotel rates probably have high incomes, as they would?ve needed to be able to afford the luxury of spending both time and money in the first place. This means that although they are the ones who are most affected by the increased prices, they are also the ones who are most able to afford it. ...read more.

Conclusion

Tourists, on the other hand, suffer because there aren?t enough substitutes for hotels in London for them to turn to, and so most of them are forced to pay the higher hotel rates. In the short run, both the demand for and prices of hotel rooms in London will remain high, as many tourists flock to London to spectate the Olympics. In the long run, however, once the Games are finished, there will be less of an incentive for tourists to visit London. This fall in demand would result in a decrease in price, and a return to demand being elastic ? higher prices would lead to a significant decrease in demand. In conclusion, the London 2012 Olympics has resulted in inelastic demand for hotels in the area. This has resulted in significant price hikes, as hotels seek to take advantage of tourists willing to pay extra costs in order to spectate the Games. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

## Found what you're looking for?

• Start learning 29% faster today
• 150,000+ documents available
• Just £6.99 a month

Not the one? Search for your essay title...
• Join over 1.2 million students every month
• Accelerate your learning by 29%
• Unlimited access from just £6.99 per month

# Related International Baccalaureate Economics essays

1. ## Unemployment IA

The cause of unemployment falling could be linked to the season. During the Christmas season, the demand for normal and luxury goods are high, this means that the demand for labour would also increase because of the sudden change in consumption of goods.

2. ## Economics HL - IA

The worst case scenario, would be that several large cities like London and Miami, would be flooded, destroying economically prosperous areas. In any case, the effects of global warming will be devastating and will affect everybody. So in fact, when a consumer purchases a certain good, which production emits CO2,

1. ## Strategic and Operational Performance Assessment at Petrom

The company's core activities are represented by the three business segments - Exploration & Production, Refining & Marketing, and Gas & Power - and operated with a focus on their sustainability. As a regional center within the OMV Group for Southeastern Europe, Petrom plays an essential role in delivering concrete

2. ## Economic Article Commentary - The five biggest supermarkets in the UK are accused of ...

This article confirms what is said in the class, because in the class was said that the government intervenes in the market when it is needed. For example when the consumers are harmed by the producers and the government thinks that the market mechanism can't and will not solve the problem on itself.

1. ## Markets and Price Determination

* Always use the correct terms - when price changes there is an increase or decrease in the quantity supplied. If the price of pies rises from p1 to p2, the quantity supplied increases from q1 to q2 per day (extension of supply from A to B).

2. ## Macroeconomics IA South Korea inflation at threeyear high on food price jump

For example, the government could grant subsidies to firms dedicated to food production and other simple commodities in Korea.

1. ## Macroeconomics Commentary - Japan's consumer prices fall on weak domestic demand

Government tried to correct deflation and to reduce rate of unemployment by means of pass an emergency budget of \$155 billion to boost domestic demand. However, the aim will not be fulfilled in short-run. Japan is a developed country. There are periods of rising growth, followed by periods of slowing growth, and falling growth in developed countries.

2. ## Economic Commentary: Price Floor - A ban on the sale of alcohol below a ...

Due to the price floor put on alcohol at price PF, there is an increase in the price from Pe to PF. Since the Law of Supply states that producers will supply more of a good or service at higher prices and less of a good or service at lower

• Over 160,000 pieces
of student written work
• Annotated by
experienced teachers
• Ideas and feedback to