If average household income increases by 25%, from $40,000 to $50,000 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 20%, from $250 to $200, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner rooms per night. Because the cross-price elasticity from rooms per night to 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 total revenue to . Decreasing the price will always have this effect on revenue when Big Winner is operating on the portion of its demand curve.
If average household income increases by 25%, from $40,000 to $50,000 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 20%, from $250 to $200, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner rooms per night. Because the cross-price elasticity from rooms per night to 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 total revenue to . Decreasing the price will always have this effect on revenue when Big Winner is operating on the portion of its demand curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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