## Graph and Demand Analysis for Ocean's Hotel Rooms### Graph DescriptionThe graph on the left displays the demand curve for Ocean's hotel rooms. The vertical axis represents the price in dollars per room, ranging from $60 to $600. The horizontal axis shows the quantity of hotel rooms ranging from 0 to 500. The demand curve slopes downward from left to right, indicating a typical inverse relationship between price and quantity demanded.A horizontal line marks the current price level and shows the quantity demanded at this price.### Graph Input Tool#### Market for Ocean's Hotel Rooms- **Price**: $350 (Dollars per room)- **Quantity Demanded**: 150 (Hotel rooms per night)#### Demand Factors- **Average Income**: 50 (Thousands of dollars)- **Airfare from MSY to ACY**: $200 (Dollars per roundtrip)- **Room Rate at Meadows**: $250 (Dollars per night)### Scenarios for Analysis1. **Increase in Income**: - If average household income increases by 20%, from $50,000 to $60,000 per year, determine the change in quantity of rooms demanded at Ocean's. Calculate the income elasticity of demand to understand how sensitive hotel room demand is to income changes.2. **Increase in Airfare**: - If the price of an airline ticket from MSY to ACY increases by 10%, from $200 to $220 for a roundtrip, analyze the impact on the quantity of rooms demanded at Ocean's. Calculate the cross-price elasticity of demand for hotel rooms and airline tickets to understand the interrelationship.3. **Price Decrease**: - Consider the effects of reducing the price per room to $325. Evaluate how this influences total revenue, focusing specifically on understanding how price adjustments affect demand and revenue for Ocean’s hotel rooms.This analysis helps illustrate the concepts of elasticity and how various factors influence demand in the context of hotel room pricing. **Understanding Demand Factors for Hotel Rooms**### Demand Factor - Initial Values- **Average American household income**: $50,000 per year- **Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY)**: $200 per roundtrip- **Room rate at the Meadows Hotel and Casino, which is near the Oceans**: $250 per night### InstructionsUse the graph input tool to assist you in answering 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.### Graph Input Tool#### Graph DescriptionThe graph plots the relationship between price and quantity for hotel rooms.- **Vertical Axis**: Price (Dollars per room)- **Horizontal Axis**: Quantity (Hotel rooms)- There is a downward-sloping "Demand" curve illustrating the demand for hotel rooms.- The initial price is set at $350, and the quantity demanded at this price is 150 rooms per night.#### Demand Factors1. **Average Income (Thousands of Dollars)** - Value: 502. **Airfare from MSY to ACY (Roundtrip)** - Value: 2003. **Room Rate at Meadows (Dollars per night)** - Value: 250### Scenario AnalysisFor each scenario, assume that all demand factors return to their original values, and Oceans is charging $350 per room per night.**Scenario**: If the average household income increases by 20%, from $50,000 to $60,000 per year, examine how the quantity of rooms demanded at Oceans changes from ___ rooms per night to ___ rooms per night. Determine the income elasticity of demand is ___, indicating that hotel rooms at the Oceans are ___.This exercise helps understand how changes in economic factors impact hotel room demand, providing insight into the relationship between income levels and demand elasticity.

Demand refers to the quantity of a good or service that consumers are willing and able to purchase…

Demand Factor Average American household income Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) Room rate at the Meadows Hotel and Casino, which is near the Oceans Use 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. PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 0 Demand D 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Oceans's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Initial Value $50,000 per year $200 per roundtrip $250 per night Demand Factors Average Income (Thousands of dollars) Airfare from MSY to ACY (Dollars per roundtrip) Room Rate at Meadows (Dollars per night) 350 150 50 200 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $350 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 Oceans rooms per night to rooms per night. Therefore, the income elasticity of demand is Oceans are from meaning that hotel rooms at the

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC