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 Pittsburgh (PIT) to Atlantic City (ACY)Room rate at the Continental Hotel and Casino, which is near the RiversUse the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graphNote: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.PRICE (Dolars per room)400350200150100no0Demand50 100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Graph Input ToolMarket for Rivers's Hotel RoomsPrice(Dollars per room)QuantityDemanded(Hotel rooms permight)Demand FactorsAverage Income(Thousands ofdollar)Initial Value$50,000 per year$100 per roundtrip$200 per nightAirfare from PIT toACY(Dollars perroundtrip)Room Rate atContinental(Dollars per night)35015050100200? 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 Riversrooms 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 PIT 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 Riversfromrooms per night. Because the cross-price elasticity of demand isrooms per night to [hotel rooms at the Rivers and airline trips between PIT 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 toDecreasing the price will always have this effect on revenue when Rivers is operating on theportion of itsdemand curve.

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 rooms per night to rooms per night. Therefore, the income elasticity of demand is Rivers are from meaning that hotel rooms at the If the price of an airline ticket from PIT 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 price elasticity of demand is from rooms per night to rooms per night. Because the cross- hotel rooms at the Rivers and airline trips between PIT 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 Decreasing the price will always have this effect on revenue when Rivers is operating on the portion of its demand curve.

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 rooms per night to rooms per night. Therefore, the income elasticity of demand is Rivers are from meaning that hotel rooms at the If the price of an airline ticket from PIT 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 price elasticity of demand is from rooms per night to rooms per night. Because the cross- hotel rooms at the Rivers and airline trips between PIT 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 Decreasing the price will always have this effect on revenue when Rivers is operating on the portion of its demand curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

9. Application: Elasticity and hotel rooms
The 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 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.
Demand Factor
Average American household income
Roundtrip airfare from Pittsburgh (PIT) to Atlantic City (ACY)
Room rate at the Continental Hotel and Casino, which is near the Rivers
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 (Dolars per room)
400
350
200
150
100
no
0
Demand
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
might)
Demand Factors
Average Income
(Thousands of
dollar)
Initial Value
$50,000 per year
$100 per roundtrip
$200 per night
Airfare from PIT to
ACY
(Dollars per
roundtrip)
Room Rate at
Continental
(Dollars per night)
350
150
50
100
200
?

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.
from
If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Rivers
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 PIT 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 PIT 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
Decreasing the price will always have this effect on revenue when Rivers is operating on the
portion of its
demand curve.

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