Suppose you run an apartment rental company in a
suburb area, call it Armazy, of country Zanzy with x units of one and
two bedroom apartments combined. The population size and the income
level in Armazy area are good enough for the market for apartment
rental. You are the only player in the area, and the closest competitor
is about 100 miles away. Your marginal cost of running the rental
company is $c.
a. Describing your pricing strategy that maximizes your profit. How does
the price elasticity of demand for apartment affect your pricing
strategy? What factors that affect the price elasticity of demand for
your apartment units? For each of the questions above, explain your
answers as detailed as possible, using the equations and framework
explained in class and textbook.
b. Realizing that you enjoy sizable profits from the business, some
firms decide to build new apartment complexes in the area. Suppose now
that there are three players in the market and the apartment units
offered are relatively indistinguishable from each other (for instance,
they offer almost the same amenities, and etc.). Describing your pricing
strategy that maximizes your profit. How does the price elasticity of
demand for apartment affect your pricing strategy? What factors that
affect the price elasticity of demand for your apartment units? For each
of the questions above, explain your answers as detailed as possible,
using the equations and framework explained in class and textbook.
c. Suppose Armazy is now one of the fastest growing suburbs in Zanzy. A
number of real estate developers are building new residential housing
complexes and offering a competitive price, whether renting or buying.
Describing your pricing strategy that maximizes your profit. How do the
new residential housings affect the price elasticity of demand for your
apartment and your pricing strategy? For each of the questions above,
explain your answers as detailed as possible, using the equations and
framework explained in class and textbook.
d. Suppose that Armazy is well-known for its natural beauty and it
attracts a lot of visitors/tourists during the summer time. Also
consider that there is a big training center, not far from your
apartment complex, for a mega retail company, headquartered in the city
of Azuba.The trainings are usually run in the summer. Describing your
pricing strategy that maximizes your profit. How do the new residential
housings affect the price elasticity of demand for your apartment and
your pricing strategy? For each of the questions above, explain your
answers as detailed as possible, using the equations and framework
explained in class and textbook
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