To avoid an increase in the local property tax, Sullivan County, New York, proposed a 2 percent hotel tax, which presumably would be passed on to tourists. The hotel industry argued that the tax would hurt hotel business. They are really arguing that
A)tourist and convention demand is inelastic, so hotel bookings will decline.
B)tourist and convention demand is very elastic, so hotel bookings will decline.
C)they would prefer a property tax increase instead.
D)it is unfair to tax people who do not live in the area.

Question

Quizplus · Accepted Answer

The hotel industry's argument suggests that they believe the demand for hotel bookings is highly elastic, meaning that even a small increase in price (in this case, due to the hotel tax) will result in a significant decline in demand. If they believed demand was inelastic (choice A), they would not be as concerned about the impact of the tax. They do not suggest that they would prefer a property tax increase (choice C) and do not mention fairness (choice D) as a concern.

To Avoid an Increase in the Local Property Tax, Sullivan