Friday, August 16, 2013

Using demand and supply to choose a vacation spot

School for my children starts next week, and we realized that our youngest had never been to the ocean.  We decided to just take a short getaway to visit the beach, but which one?

The issues to consider:

1. We didn't want to travel too far.  Anywhere in NJ down to perhaps Ocean City, MD was in play.

2. We want the most bang-for-our-buck, and price is a big consideration!

The result for us then was quite obvious:

We got a room on the ocean, with a beautiful ocean view, for a very low price!  Other beaches in NJ, DE, and MD charged about triple what we paid in AC for similar rooms.

The question, of course, is why?  

1. Atlantic City expanded greatly in the past, as it was a gambling hub.  So they had lots of hotels, but very large demand as well.  With both of demand and supply increasing, the quantity of rooms went up dramatically, but price stayed about the same.

2. When casinos in Pennsylvania started springing up, this hurt Atlantic City's business dramatically.  Only a tiny fraction of Pennsylvanians who used to travel to AC will still make the trip.  This decreased the demand for hotel rooms significantly. 

3. As we know from principles of microeconomics, a decrease in demand will decrease the price.

I didn't know what to expect as far as beach quality, but I was impressed and our kids loved the ocean.  Overall, Atlantic City isn't the safest place.  However, for a short trip where we stayed only on the beach/boardwalk (except for a short excursion to the outlet malls), AC seemed seemed quite safe.  We'll definitely be back! 

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