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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.

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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Attempts 9. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Lakes 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. PRICE (Dollars per room) Demand Factor Average American household income Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) Room rate at the Mountaineer Hotel and Casino, which is near the Lakes 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. 500 450 400 350 300 250 200 150 100 Average / 3 50 0 0 Lakes are Demand 1 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Lakes's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from MSY to ACY Initial Value $50,000 per year $200 per roundtrip $200 per night (Dollars per roundtrip) Room Rate at Mountaineer (Dollars per night) 100 400 50 200 200 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. 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 rooms per night. Therefore, the income elasticity of demand is ? from , meaning that hotel rooms at the 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 of demand is rooms per night to , 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.
Transcribed Image Text:Attempts 9. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Lakes 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. PRICE (Dollars per room) Demand Factor Average American household income Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) Room rate at the Mountaineer Hotel and Casino, which is near the Lakes 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. 500 450 400 350 300 250 200 150 100 Average / 3 50 0 0 Lakes are Demand 1 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Lakes's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from MSY to ACY Initial Value $50,000 per year $200 per roundtrip $200 per night (Dollars per roundtrip) Room Rate at Mountaineer (Dollars per night) 100 400 50 200 200 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. 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 rooms per night. Therefore, the income elasticity of demand is ? from , meaning that hotel rooms at the 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 of demand is rooms per night to , 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.
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