### Graph Input Tool**Market for Oceans's Hotel Rooms**- **Price** (Dollars per room): 350- **Quantity Demanded** (Hotel rooms per night): 150**Demand Factors**- **Average Income** (Thousands of dollars): 50- **Airfare from MSY to ACY** (Dollars per roundtrip): 200- **Room Rate at Meadows** (Dollars per night): 250---**Graph Description**The graph shows the demand curve for hotel rooms at Oceans's, with the price on the vertical axis and quantity on the horizontal axis. The demand line slopes downward from left to right, illustrating that as price decreases, the quantity demanded increases. The initial conditions on the graph show a price of $350 and quantity demanded of 150 rooms. There is a horizontal line showing the price level and a vertical dashed line representing the quantity demanded.### Scenarios1. **Income Change** - If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Oceans changes from ___ rooms per night to ___ rooms per night. Therefore, the income elasticity of demand is ___, meaning that hotel rooms at the Oceans are ___.2. **Airfare Price Increase** - If the price of an airline ticket from MSY to ACY were to increase by 10%, from $200 to $220 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Oceans changes from ___ rooms per night to ___ rooms per night. Because the cross-price elasticity of demand is ___, hotel rooms at the Oceans and airline trips between MSY and ACY are ___.3. **Price Decrease Decision** - Oceans is debating decreasing the price of its rooms to $325 per night. Under the initial demand conditions, this would cause its total revenue to ___. Decreasing the price will have this effect on revenue when Oceans is operating on the ___ portion of its demand curve. ## 9. Application: Elasticity and Hotel RoomsThe following graph input tool shows the daily demand for hotel rooms at the Oceans 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.| Demand Factor | Initial Value ||--------------------------------------------------------------------|-----------------------|| Average American household income | $50,000 per year || Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) | $200 per roundtrip || Room rate at the Meadows Hotel and Casino, which is near the Oceans| $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.### Graph ExplanationThe graph displays the market demand for hotel rooms at the Oceans Hotel presented as a downward-sloping demand curve.- **Price (Dollars per room):** Displayed on the vertical axis, ranging from $0 to $600.- **Quantity Demanded (Hotel rooms per night):** Displayed on the horizontal axis, ranging from 0 to 500.The intersection of the price line at $350 and the demand curve illustrates the quantity demanded, which is shown as 150 hotel rooms per night.### Graph Input ToolThe tool allows for the adjustment of variables impacting demand:- **Price:** Initially set at $350.- **Quantity Demanded:** Initially set at 150 hotel rooms per night.### Demand Factors- **Average Income (Thousands of dollars):** Initially set at 50 (representing $50,000).- **Airfare from MSY to ACY (Dollars per roundtrip):** Initially set at 200.Adjusting these factors will change the position of the demand curve and the corresponding quantity demanded.

Demand refers to the quantity of a good or service that consumers are willing and able to purchase…

PRICE (Dollars per room) 450 400 350 300 250 200 150 100 50 0 Demand 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from MSY to ACY (Dollars per roundtrip) Room Rate at Meadows (Dollars per night) 350 150 50 200 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $350 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 Oceans from rooms per night to [ rooms per night. Therefore, the income elasticity of demand is meaning that hotel rooms at the Oceans are If the price of an airline ticket from MSY to ACY were to increase by 10%, from $200 to $220 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Oceans from [ rooms per night to [ rooms per night. Because the cross-price elasticity of demand is hotel rooms at the Oceans and airline trips between MSY and ACY are Oceans is debating decreasing the price of its rooms to $325 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 Oceans is operating on the portion of its demand curve.

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC