For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock 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 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 from , hotel rooms at the Peacock and hotel rooms at the Grandiose are quantity of rooms demanded at the Peacock rooms per night to ] rooms per night. Because the cross-price elasticity of demand is Peacock 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 total revenue to -. Decreasing the price will always have this effect on revenue when Peacock 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 Peacock 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 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 from , hotel rooms at the Peacock and hotel rooms at the Grandiose are quantity of rooms demanded at the Peacock rooms per night to ] rooms per night. Because the cross-price elasticity of demand is Peacock 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 total revenue to -. Decreasing the price will always have this effect on revenue when Peacock is operating on the portion of its demand curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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