For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $100 per room per night. from If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes rooms per night to , meaning that hotel rooms at the rooms per night. Therefore, the income elasticity of demand is Lakes are If the price of a room at the Mountaineer were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes from rooms per night. Because the cross-price elasticity rooms per night to of demand is hotel rooms at the Lakes and hotel rooms at the Mountaineer are Lakes is debating decreasing the price of its rooms to $75 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 Lakes 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 Lakes is charging $100 per room per night. from If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes rooms per night to , meaning that hotel rooms at the rooms per night. Therefore, the income elasticity of demand is Lakes are If the price of a room at the Mountaineer were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes from rooms per night. Because the cross-price elasticity rooms per night to of demand is hotel rooms at the Lakes and hotel rooms at the Mountaineer are Lakes is debating decreasing the price of its rooms to $75 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 Lakes is operating on the portion of its demand curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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