Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool (?) Market for Big Winner's Hotel Rooms 500 I Price (Dollars per room) 450 150 400 Quantity Demanded (Hotel rooms per night) 350 350 300 250 Demand Factors 200 150 Average Income (Thousands of dollars) Demand 40 100 Airfare from JFK to LAS (Dollars per roundtrip) 50 250 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Room Rate at Lucky (Dollars per night) 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $150 per room per night. If average household income increases by 50%, from $40,000 to $60,000 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 an airline ticket from JFK to LAS were to increase by 20%, from $250 to $300 roundtrip, 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 airline trips between JFK and LAS are Big Winner is debating decreasing the price of its rooms to $125 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. PRICE (Dollars per room)
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool (?) Market for Big Winner's Hotel Rooms 500 I Price (Dollars per room) 450 150 400 Quantity Demanded (Hotel rooms per night) 350 350 300 250 Demand Factors 200 150 Average Income (Thousands of dollars) Demand 40 100 Airfare from JFK to LAS (Dollars per roundtrip) 50 250 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Room Rate at Lucky (Dollars per night) 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $150 per room per night. If average household income increases by 50%, from $40,000 to $60,000 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 an airline ticket from JFK to LAS were to increase by 20%, from $250 to $300 roundtrip, 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 airline trips between JFK and LAS are Big Winner is debating decreasing the price of its rooms to $125 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. PRICE (Dollars per room)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Graph Input Tool
(?
Market for Big Winner's Hotel Rooms
500
I Price
(Dollars per room)
450
150
400
Quantity
Demanded
(Hotel rooms per
night)
350
350 +
* 300
250
Demand Factors
200
150
Average Income
(Thousands of
dollars)
Demand
40
100 +
Airfare from JFK to
LAS
50
250
(Dollars per
roundtrip)
50
100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
Room Rate at Lucky
(Dollars per night)
250
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $150 per
room per night.
If average household income increases by 50%, from $40,000 to $60,000 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 an airline ticket from JFK to LAS were to increase by 20%, from $250 to $300 roundtrip, while all other demand factors remain at their
initial values, the quantity of rooms demanded at the Big Winner
rooms per night to
rooms per night. Because the cross-
price elasticity of demand is
v, hotel rooms at the Big Winner and airline trips between JFK and LAS are
Big Winner is debating decreasing the price of its rooms to $125 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
v portion of its demand curve.
PRICE (Dollars per room)
Transcribed Image Text:The following graph input tool shows the daily demand for hotel rooms at the Big Winner Hotel and Casino in Las Vegas, Nevada. 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.
Demand Factor
Initial Value
Average American household income
$40,000 per year
Roundtrip airfare from New York (JFK) to Las Vegas (LAS)
$250 per roundtrip
Room rate at the Lucky Hotel and Casino, which is near the Big Winner
$250 per night
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.
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