Introduction to macroecomincs
use supply and demand analysis to explain why hotel room rental rates near your campus during
parents weekend and guaduation weekend might differ from the rates charged during the rest of the year.
Introduction to macroeconomics
Supply and demand is one of the economic models that help in determination of price in a
given market. Supply curve is a curve that slopes upwards. According to the law of supply, as
INTRODUCTION TO MACROECONOMICS 2
price increase, higher amount of products are supplied (Mankiw &Taylor, 2011). On the other
hand, demand curve slopes downward. This law of demand asserts that as demand increases,
prices of commodities increase. The law of supply and demand explains why hotel room rental
rates increases during parent visitation and graduation.
The changes in prices in the campus during different period are best explained using
demand and supply model. The reasons that push prices of hotel rooms during parents weekend
and graduation weekend in the campus is because of high demand. Parents and visitors require
many rooms and this raises the prices. Because of the increased demand and stable supply of
rooms, the owners rent them at higher prices. Therefore, in this case, the demand of hotels rooms
is usually higher and therefore, the owners increase the prices to benefits from this high demand.
The reason for higher prices is because of low supply. The demand of the same hotel rooms is
usually low during other period of the semester because the number of visitors is low. The low
level of demand pushes the prices low as the hotel owners try to woo their customers during the
period of low season.
Therefore, it is apparent that the law of demand and supply is applicable during various
seasons. As demand of hotel rooms’ increases, prices increases while as the demand reduce
during other days of the year, the prices decreases because of the high level of supply.
Businesspersons are therefore required to understand these models as they do their business.
Reference
Mankiw, N., &Taylor, M. (2011). Economics (2nd ed., revised ed.). Andover: Cengage
Learning.
