For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Big Winner is charging $200 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 Big Winner from rooms per night to rooms per night. Therefore, the income elasticity of demand is ,meaning that hotel rooms at the Big Winner are If the price of a room at the Lucky 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 Big Winner from rooms per night to rooms per night. Because the cross-price elasticity of demand is , hotel rooms at the Big Winner and hotel rooms at the Lucky are Big Winner is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause its v portion total revenue to Decreasing the price will always have this effect on revenue when Big Winner is operating on the of its demand curve.
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Big Winner is charging $200 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 Big Winner from rooms per night to rooms per night. Therefore, the income elasticity of demand is ,meaning that hotel rooms at the Big Winner are If the price of a room at the Lucky 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 Big Winner from rooms per night to rooms per night. Because the cross-price elasticity of demand is , hotel rooms at the Big Winner and hotel rooms at the Lucky are Big Winner is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause its v portion total revenue to Decreasing the price will always have this effect on revenue when Big Winner is operating on the of its demand curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Big Winner is charging $200 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 Big Winner from
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
,meaning that hotel rooms at the Big
Winner are
If the price of a room at the Lucky 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 Big Winner from
rooms per night to
rooms per night. Because the cross-price elasticity of
demand is
, hotel rooms at the Big Winner and hotel rooms at the Lucky are
Big Winner is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause its
v portion
total revenue to
Decreasing the price will always have this effect on revenue when Big Winner is operating on the
of its demand curve.
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