Answer

The law of supply and demand, one of the most basic economic laws, ties into almost all

economic principles. In practice, people's willingness to supply and demand a good determines

the market equilibrium price or the price where the quantity of the good that people are willing

to supply equals the quantity that people demand. This theory explains the interaction between

the sellers of a resource and the buyers for that resource. The theory defines the relationship

between the price of a given good or product and the willingness of people to either buy or sell

it. Generally, as price increases, people are willing to supply more and demand less and vice

versa when the price falls. The two laws interact to determine the actual market price and

volume of goods on the market.

Switching to the question under scrutiny during Christmas season, hotels at the coast will raise

their charges. Despite this, they always have 100% bed occupancy. This is contrary to demand

and supply principles because several independent factors can affect the shape of market supply

and demand, influencing both the prices and quantities that we observe in markets at any given

point in time. During Christmas festive hotels at the coast offer Veblen Goods to consumers. A

Veblen good is a good for which demand increases as the price increases, because of its

exclusive nature and appeal as a status symbol. A Veblen good has an upward-sloping demand

curve, which runs counter to the typical downward-sloping curve. Veblen goods contradict the

basic law of demand, which states that quantity demanded has an inverse relationship with

price, because of their exclusivity appeal. If the price of a coveted and expensive product is

increased, it may actually enhance its appeal to the status-conscious, since it is now further out

of reach for the average consumer.

But if the price of such a product is lowered, its exclusive appeal may diminish resulting in it

being shunned by status-conscious consumers, while at the same time still being too expensive

for the mass market. Overall demand would therefore decline with lower prices, instead of

increasing. Studies indicate that people are happier and receive more utility with the purchase of

a Veblen good. This is a result of the good making the individual feel more exclusive and

important, with the knowledge that they are purchasing something of high quality that is out of

reach for others. Many individuals believe this is worth the premium they pay.

Each hotelier must employ sales strategies that are beneficial for both their own market group

and the destination. They increase costs during the Christmas season because to increased

demand and the fact that it is peak season. Numerous residents and tourists alike desire a

staycation. They maintain 100 percent occupancy because a hotel's philosophy is that a fully

occupied hotel creates a lively, hospitable environment for its visitors. A hotel that is empty or

virtually empty does not create a favorable image on those considering staying there.

Additionally, there are some guests who are willing to pay more than the listed amount simply

to have a place to stay. Typically, during the Christmas season, as it is a holiday season, the

majority of people are on vacation and wish to stay in a hotel on the coast and bond with their

loved ones.

They charge a higher rate than usual because it is peak season; hotels and even some resorts do

the same thing when peak season arrives. Certain hotels operate at 100% occupancy; this is

presumably their goal to maintain a positive image for the visitor while still attracting clients

prepared to pay a premium for an accommodation.

Sometimes, when a good is priced high, an individual will automatically assume it to be of

better quality, when in fact it is not necessarily so. Many companies source or produce their

goods in the same regions or factories, but because of marketing and brand identity. Consumers

automatically associate the higher price with better quality. If the price is increased on the same

good, consumers may then perceive this as improved quality and are willing to pay the higher

price.