1. Which of the following description explains the meaning and the calculation process of the Price Elasticity on Demand most appropriately?

It determines the degree of changes of demand (of a product) when the price (of the product) changes. The calculation process is: Change of Demand (in #) divided by the Change of Price ($).

It determines the degree of the Change of Price (of a product) when the Demand (of the product) changes. The calculation process is: Change of Price (in $) divided by the Change of Demand (in #).

It determines the degree of changes of demand (of a product) when the price (of the product) changes. The calculation process is: Change of Demand (in %) divided by the Change of Price (in %).

It determines the degree of changes of price (of a product) when the demand (of the product) changes. The calculation process is: Change of Price (in %) divided by the Change of Demand (in %).

2. Your business recently has increased the room price by $5 from $75 to $80. During the past (in similar seasons with similar events in town), the average occupancy rates were 75%. With the new price, however, the occupancy rate has fallen to 72%. What is your conclusion about the impact of the room price changes on the demand?

The demand is elastic. Price increase must be very carefully determined.

The demand is not elastic. Price increase (to a certain degree) can be easily determined.

Price changes of the hotel room and the demand are indifferent to each other,

None of the above