Question
The market demand for rental properties in Key West during the High Season is estimated as follows: QH = 36.2 1.50 PH + 0.10 PO
The market demand for rental properties in Key West during the "High Season" is estimated as follows:
QH = 36.2 1.50 PH + 0.10 PO + 0.075 Income
where QH is the quantity of rental properties rented during the High Season; PH and PO are rental price per square foot in dollars for the high-season and off-season, respectively; and Income denotes average household income of renters (in thousands of dollars per year).
Last year PH = $30, PO = $8, and I = $800. In addition, the quantity of houses rented in the off-season (QO) was 45
Based on this information, calculate the cross-price elasticity between the high-season and the off season. (That is, how does demand for the high season respond to a change in price in the off season?)
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