Your first assignment as a new manager is to analyze the market for the rental cars in the city. You would like to see if there is an opportunity for improvement in the business model of your employer, A+ Rental Cars. Your research staff offer you both quantitative and qualitative information. First, they have estimated the demand for rental cars using sales data. Second, they have monitored the local market to list up non-price factors that affect the demand. Lastly, they have surveyed A+ Rental Cars customers. Read the attached report to learn about the details. Now, it's time for you to analyze the business opportunities. Write a business report. Some questions to answer are listed as Tasks. Unlike the Team Homework, this assignment has few structures to guide you through. Please be creative yet focused on the goal. Avoid jargon and use plain language in the body of your report, while including necessary technical details in an appendix. For instance, explain price responsiveness and its implication in your body, while showing the calculation of demand elasticities in your appendix. Research Staff Memo During the data collection, the overall average price was $28, although the prices ranged from $20 to $35 due to premium and options. The estimated demand for economy cars is as follows: = 90 2.4P, where the quantity demanded is the number of rental contracts initiated each week in the economy category and the price is the average daily rate A+ Rental Cars charged for its economy cars in a given week. Everything else is held constant through statistical procedures (i.e. linear regression). The research staff found that several prominent factors affect the demand such as Whether the school is in session or not. Less economy cars are demanded during school sessions. Average price offered by the competitor. More economy cars are demanded when the competitor price is higher. Number of flights. Less economy cars are demanded when there are less flights. Number of accidents in the area. Less economy cars are demanded when there are less flights. In contrast, some factors are surprisingly not associated with the demand change. Such factors include: Number of days with severe weather. Total spending on the advertisement (TV, paper, and billboard). Average price of luxury cars. Moreover, some survey was collected among the A+ Rental Cars customers during this period. Here is a list of prominent opinions: "I learned about the company through friends." "I needed a car to visit my son/daughter in school." "The price was too high during holidays."

Question:

Looking into the future, you contacted the tourism section of the local city government. They want to improve the number of visitors during the summer. They consider some form of subsidies that can reduce the cost of rental cars to the tourists while keeping the revenue of rental car companies intact. How would this affect A+ Rental Cars? Explain while using some visual aids that depict a) demand curve and b) budget and indifference curve(s)