Hotel Demand Equation

Grand Palace Hotel demand function for its guest room for the month of May 2021 is represented by the following equation.

Qd=700-2Pr+0.21TS+1.6I+0.05E

Where,

Qd is quantity demanded of Grand Palace Hotel guest room

Pr is price of room (ADR)

TS is consumer travel season index

I is the index showing traveller's intention to book a room at Grand Palace Hotel

E is the index of traveller's expectation that a lower room price over the following six months

The hospitality consultant engaged by Grand Palace Hotel has provided the following indices for consumer travel season, traveller's intention to book a room at Grand Palace Hotel and traveller's expectation that a lower room price over the next six months:

TS = 20

I = 2.5

E = 100

1. Derive the demand equation for Grand Palace Hotel for the month of May 2021, based on the assumption of 'ceteris paribus'.
2. Calculate the price for a room when the demand is 150
3. Defend whether the assumption that the principle of 'ceteris paribus' is a reasonable assumption.