For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Rivers is charging $350 per roomper night.fromIf average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Rivers risesrooms per night to rooms per night. Therefore, the income elasticity of demand ismeaning that hotel rooms at theRivers areIf the price of an airline ticket from DSM to ACY were to increase by 50%, from $100 to $150 roundtrip, while all other demand factors remain at theirinitial values, the quantity of rooms demanded at the Riversrooms per night. Because the cross-priceelasticity of demand isfromrooms per night tohotel rooms at the Rivers and airline trips between DSM and ACY areRivers is debating decreasing the price of its rooms to $325 per night. Under the initial demand conditions, you can see that this would cause its totalrevenue to increase Decreasing the price will always have this effect on revenue when Rivers is operating on the elastic portion of itsdemand curve.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)50045040035030020015010050Demand50 100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Graph Input ToolMarket for Rivers's Hotel Rooms:Price(Dollars per room)QuantityDemanded(Hotel rooms pernight)Demand FactorsAverage Income(Thousands ofdollars)Airfare from DSM toACY(Dollars perroundtrip)Room Rate atContinental(Dollars per night)35015050100200? 9. Application: Elasticity and hotel roomsThe following graph input tool shows the daily demand for hotel rooms at the Rivers Hotel and Casino in Atlantic City, New Jersey. To help the hotelmanagement better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demandfactors, 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 Des Moines (DSM) to Atlantic City (ACY).Room rate at the Continental Hotel and Casino, which is near the RiversInitial Value$50,000 per year$100 per roundtrip$200 per nightUse 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.

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

For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Rivers is charging $350 per room per night. If average household Income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Rivers rises from rooms per night to rooms per night. Therefore, the income elasticity of demand is meaning that hotel rooms at the Rivers are If the price of an airline ticket from DSM to ACY were to increase by 50%, from $100 to $150 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Rivers from [ rooms per night. Because the cross-price elasticity of demand is rooms per night to , hotel rooms at the Rivers and airline trips between DSM and ACY are Rivers is debating decreasing the price of its rooms to $325 per night. Under the initial demand conditions, you can see that this would cause its total revenue to increase Decreasing the price will always have this effect on revenue when Rivers is operating on the elastic portion of its demand curve. 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 O Demand 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Rivers's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from DSM to ACY (Dollars per roundtrip) Room Rate at Continental (Dollars per night) 350 150 50 100 200

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC