5000 50 100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Airfare from JFK toLAS(Dollars perroundtrip)Room Rate at Lucky(Dollars per night)100200For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $200 perroom per night.fromIf average household income increases by 50%, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Big Winnerrooms per night to rooms per night. Therefore, the income elasticity of demand is, meaning that hotel rooms at theBig Winner areIf the price of a room at the Lucky were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, thequantity of rooms demanded at the Big Winnerrooms per night. Because the cross-price elasticity ofdemand isfromrooms per night tohotel rooms at the Big Winner and hotel rooms at the Lucky areBig Winner is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause itstotal revenue toDecreasing the price will always have this effect on revenue when Big Winner is operating on theportion of its demand curve. 9. Application: Elasticity and hotel roomsAThe following graph input tool shows the daily demand for hotel rooms at the Big Winner Hotel and Casino in Las Vegas, Nevada. To help the hotelmanagement better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These dem.factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool.Demand FactorAverage American household incomeRoundtrip airfare from New York (JFK) to Las Vegas (LAS)Room rate at the Lucky Hotel and Casino, which is near the Big WinnerUse the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.(woo500450400350Initial Value$40,000 per year$100 per roundtrip$200 per nightGraph Input ToolMarket for Big Winner's Hotel RoomsPrice(Dollars per room)QuantityDemanded200116300

Demand is the desire backed by a willingness to pay and the ability to pay by an individual. The…

0 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Airfare from JFK to LAS (Dollars per roundtrip) Room Rate at Lucky (Dollars per night) 100 200 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $200 per room per night. from If average household income increases by 50 %, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Big Winner rooms per night to rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Big Winner are If the price of a room at the Lucky were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner from rooms per night to rooms per night. Because the cross-price elasticity off demand is , hotel rooms at the Big Winner and hotel rooms at the Lucky are

0 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Airfare from JFK to LAS (Dollars per roundtrip) Room Rate at Lucky (Dollars per night) 100 200 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $200 per room per night. from If average household income increases by 50 %, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Big Winner rooms per night to rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Big Winner are If the price of a room at the Lucky were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner from rooms per night to rooms per night. Because the cross-price elasticity off demand is , hotel rooms at the Big Winner and hotel rooms at the Lucky are

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 4.9P: (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of...

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Similar questions

Plot the price and quantity data given in the demand schedule of exercise 1. Put price on the vertical axis and quantity on the horizontal axis. Indicate the price elasticity value at each quantity demanded. Explain why the elasticity value gets smaller as you move down the demand curve.
(Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of demand measures, for a given price, the __________ in quantity demanded divided by the __________ income from which it resulted. b. If a decrease in the price of one good causes a decrease in demand for another good, the two goods are __________. c. If the value of the cross-price elasticity of demand between two goods is approximately zero, they are considered __________.
What is the formula for the income elasticity of demand?
Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
(Price Elasticity and Total Revenue) Fill in the blanks for each price-quantity combination listed in the following table. Now graph this relationship, making sure to label each axis. What relationship have you depicted?
Economists define normal goods as having a positive income elasticity. We can divide normal goods into two types: Those whose income elasticity is less than one and those whose income elasticity is greater than one. Think about products that would fall into each category. Can you come up with a name for each category?
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The equation for a demand curve is P=483Q. What is the elasticity in moving from quantity of 5 to a quantity of 6?
The Stopdecay Company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decayfigh ter, reduced the price of its electric toothbrush from $35 to $30. As a result, Stopde cays sales declined by 1,500 units per month. What is the arc cross elasticity of demand between Stopdecays toothbrush and Decayfighters toothbrush? What does this indicate about the relationship between the two products? If Stopdecay knows that the arc price elasticity of demand for its toothbrush is 1.5, what price would Stopdecay have to charge to sell the same number of units as it did before the Decayfighter price cut? Assume that Decayfighter holds the price of its toothbrush constant at $30. What is Stopdecays average monthly total revenue from the sale of electric toothbrushes before and after the price change determined in part (b)? Is the result in part (c) necessarily desirable? What other factors would have to be taken into consideration?