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11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored 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. Graph Input Tool Market for Peacock's Hotel Rooms 500 450 IPrice (Dollars per room) 200 400 Quantity Demanded (Hotel rooms per night) 300 350 300 250 Demand Factors 200 150 Derand Average Income (Thousands of 50 PRICE(Dollars per room)

11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored 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. Graph Input Tool Market for Peacock's Hotel Rooms 500 450 IPrice (Dollars per room) 200 400 Quantity Demanded (Hotel rooms per night) 300 350 300 250 Demand Factors 200 150 Derand Average Income (Thousands of 50 PRICE(Dollars per room)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. оп апy Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Peacock's Hotel Rooms 500 450 IPrice (Dollars per room) 200 400 Quantity Demanded (Hotel rooms per night) 300 350+ 300 250 Demand Factors 200 150 Demand Average Income (Thousands of 50 100 PRICE(Dollars per room)
Transcribed Image Text:11. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To help the hotel management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demand factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per night Use the graph input tool to help you answer the following questions. You will not be scored on any changes you make to this graph. оп апy Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Peacock's Hotel Rooms 500 450 IPrice (Dollars per room) 200 400 Quantity Demanded (Hotel rooms per night) 300 350+ 300 250 Demand Factors 200 150 Demand Average Income (Thousands of 50 100 PRICE(Dollars per room)
450 Price (Dollars per room) 200 400 Quantity Demanded (Hotel rooms per night) 300 350 300 250 Demand Factors 200 150 Demand Average Income 50 100 dollars) Airfare from YYZ to LAS (Dollars per round trip) 50 100 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Room Rate at Grandiose (Dollars per night) 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Peacock is charging $200 per room per night. If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock rooms per night. Therefore, the income elasticity of demand is from rooms per night to meaning that hotel rooms at the Peacock are If the price of an airline ticket from VYZ to LAS were to increase by 10%, from $100 to $110 round trip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacock_ from rooms per night to rooms per night. Because the cross- price elasticity of demand is hotel rooms at the Peacock and airline trips betvween VYZ and LAS are Peacock is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause its total revenue to Decreasing the price will always have this effect on revenue when Peacock is operating on the portion of its demand curve. PRICE(Dollars per room)
Transcribed Image Text:450 Price (Dollars per room) 200 400 Quantity Demanded (Hotel rooms per night) 300 350 300 250 Demand Factors 200 150 Demand Average Income 50 100 dollars) Airfare from YYZ to LAS (Dollars per round trip) 50 100 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Room Rate at Grandiose (Dollars per night) 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Peacock is charging $200 per room per night. If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock rooms per night. Therefore, the income elasticity of demand is from rooms per night to meaning that hotel rooms at the Peacock are If the price of an airline ticket from VYZ to LAS were to increase by 10%, from $100 to $110 round trip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacock_ from rooms per night to rooms per night. Because the cross- price elasticity of demand is hotel rooms at the Peacock and airline trips betvween VYZ and LAS are Peacock is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause its total revenue to Decreasing the price will always have this effect on revenue when Peacock is operating on the portion of its demand curve. PRICE(Dollars per room)
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