During the last five years, average daily occupancy at Autumn Acres nursing home has slid from 125 to 95 even though Autumn Acres has cut its daily rate from $125 to $115

Economics Dec 18, 2020

During the last five years, average daily occupancy at Autumn Acres nursing home has slid from 125 to 95 even though Autumn Acres has cut its daily rate from $125 to $115. How do you graph this?

Expert Solution

Let 0 represent initial and 1 represent the later one.

Demand, Q0 = 125, Q1 = 95
Price, P0 = 125 and P1 = 115

As prices have decreased, quantity price has decreased as well. Thus, this is a case of giffen good.

It can be shown in the following demand curve:

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