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Chapter 6: Problem 7

The entrance fee into Yellowstone National Park in northwestern Wyoming is " 30 for a private, noncommercial vehicle; \(\$ 25\) for a motorcycle or a snowmobile; or \(\$ 15\) for each visitor 16 and older entering by foot, bike, ski, etc." The fee provides the visitor with a seven-day entrance permit into Yellowstone and nearby Grand Teton National Park. a. Would you expect the demand for entry into Yellowstone National Park for visitors in private, noncommercial vehicles to be elastic or inelastic? Briefly explain. b. There are three general ways to enter the park: in a private, noncommercial vehicle; on a motorcycle; and by foot, bike, or ski. Which way would you expect to have the largest price elasticity of demand, and which would you expect to have the smallest price elasticity of demand? Briefly explain.

Short Answer

Expert verified
a. It is expected that the demand for entry into Yellowstone National Park for visitors in private, noncommercial vehicles would be inelastic due to lack of close substitutes and high value placed on the visit by consumers. b. The highest price elasticity of demand is expected to be for the highest costing entry method, which is a private noncommercial vehicle. The lowest elasticity is expected for the entry by foot, bike, or ski due to its lowest cost.

Step by step solution

01

Determine Elasticity for Private Vehicles

To determine whether demand is elastic or inelastic, consider if visitors have alternative places to visit or if visiting Yellowstone National Park is regarded as essential. If there are no close substitutes (similar national parks or attractions), and visitors deem the visit very important, the demand could be viewed as inelastic. This is because a price increase won't deter many visitors since they highly value the experience.
02

Compare Elasticities for Different Entry Methods

Since the price is different for each method of entrance, people may choose the cheapest option if they are sensitive to price changes, indicating high price elasticity. On the other hand, if visitors highly value a particular entry method, they might be less responsive to a price increase. For instance, demand for entering by motorcycle might be more elastic if consumers view it as a luxury and might readily switch to a cheaper mode (bike, foot) when price increases. However, demand for entry by foot or bike may be less elastic if it's the cheapest option and preferable by those who cannot afford higher prices.
03

Undertake an Overall Elasticity Analysis

Overall, it would be assumed that the entry method with the highest cost (private noncommercial vehicle - $30) might have the highest elasticity as consumers can switch to cheaper modes. The method with the lowest cost (by foot, bike, ski - $15) might have the lowest elasticity as price increases would be less likely to prevent entry. Please note that more precise results would require detailed data on consumers' reaction to price changes.

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Most popular questions from this chapter

In recent years, increases in the number of visitors to national parks such as Yellowstone and Grand Canyon have resulted in over \(\$ 12\) billion in deferred maintenance costs. In response to the overcrowding that has contributed to the cost overruns, the Park Service has considered limiting the number of daily visits to the parks and soliciting corporate sponsorships. Margaret Walls, a research director and senior fellow at Resources for the Future, has offered another suggestion: Increase entrance fees. But she warned: "Figuring out an efficient and fair fee structure will not be easy. It requires detailed data on visitation, for starters, as well as analysis to shed light on price elasticities of demand for different groups of visitors at different locations." Why is it important for the Park Service to have estimates of price elasticities of demand before raising entrance fees to the national parks?

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