popular skiing town in Colorado, there are, on average, 1,200 skiers staying in
ID: 444901 • Letter: P
Question
popular skiing town in Colorado, there are, on average, 1,200 skiers staying in various hotels and resorts. The tourism board for the town has noted that visitors spend in local shops and restaurants $60 on their first day visiting and $40 on each subsequent day. Currently, visitors stay, on average, 15 days. However, there is a proposal to significantly raise the taxes paid by hotel guests, which the tourist bureau suggests would lower the average length of stay to 10 days. However, they still expect to have 1,200 visitors at any one time. Quantify the impact of this tax increase on the revenues seen by local shops and restaurants.
A. Daily revenues increase by 1,200
B. Daily revenue decrease by 1,2000
C. Daily revenue increase by 800
D. Daily revenue decrease by 800
Explanation / Answer
Revenue in case of 15 days: $60*1 day+$40*14 days = 60+560 = $620. This is the amount spend by one visitor over a period of 15 days. Average daily revenue per visitor = 620/15 days = $41.33.
Revenue in case of 10 days: $60*1 day+$40*9 days = 60+360 = $420. This is the amount spend by one visitor over a period of 10 days. Average daily revenue per visitor = 420/10 = $42.
Thus dialy revenue has increased by ($42 - $41.33) = $0.67 per visitor. The increase for 1200 visitors = 1200*$0.67 = $804 Increase.
Thus the answer is option "c" - Daily revenue increase by 800.
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