For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $350 per room per night. If average household income increases by 50%, from $40,000 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 a room at the Grandiose were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacockv from rooms per night to rooms per night. Because the cross-price elasticity of , hotel rooms at the Peacock and hotel rooms at the Grandiose are demand is
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $350 per room per night. If average household income increases by 50%, from $40,000 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 a room at the Grandiose were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacockv from rooms per night to rooms per night. Because the cross-price elasticity of , hotel rooms at the Peacock and hotel rooms at the Grandiose are demand is
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Graph Input Tool
Market for Peacock's Hotel Rooms
500
450
I Price
(Dollars per room)
350
400
Quantity
Demanded
(Hotel rooms per
night)
150
350
300
250
Demand Factors
200
150
Average Income
(Thousands of
dollars)
Demand
40
100
Airfare from JFK to
LAS
(Dollars per
roundtrip)
50 +
200
50 100 150 200 250 300 350 400 450 500
Room Rate at
Grandiose
(Dollars per night)
QUANTITY (Hotel rooms)
250
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $350 per room
per night.
If average household income increases by 50%, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Peacock
from
rooms per night to
|rooms per night. Therefore, the income elasticity of demand is
, meaning that hotel rooms at the
Peacock are
If the price of a room at the Grandiose were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values, the
quantity of rooms demanded at the Peacock.
rooms per night to
rooms per night. Because the cross-price elasticity of
from
demand is
hotel rooms at the Peacock and hotel rooms at the Grandiose are_
Peacock 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
Decreasing the price will always have this effect on revenue when Peacock is operating on the
total revenue to
portion
of its demand curve.
PRICE (Dollars per room)
Transcribed Image Text: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.
Demand Factor
Initial Value
Average American household income
$40,000 per year
Roundtrip airfare from New York (JFK) to Las Vegas (LAS)
$200 per roundtrip
Room rate at the Grandiose Hotel and Casino, which is near the Peacock
$250 per night
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