PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 + Demand 0 + 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Oceans's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from DSM to ACY (Dollars per roundtrip) Room Rate at Meadows (Dollars per night) 300 200 40 200 200 (?) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $300 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 Oceans rooms per night to rooms per night. Therefore, the income elasticity of demand is Oceans are from , meaning that hotel rooms at the If the price of a room at the Meadows were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Oceans from rooms per night. Because the cross-price elasticity of demand is rooms per night to , hotel rooms at the Oceans and hotel rooms at the Meadows are Oceans is debating decreasing the price of its rooms to $275 per night. Under the initial demand conditions, you can see that this would cause its tota revenue to . Decreasing the price will always have this effect on revenue when Oceans is operating on the portion of its demand curve.
PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 + Demand 0 + 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Oceans's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from DSM to ACY (Dollars per roundtrip) Room Rate at Meadows (Dollars per night) 300 200 40 200 200 (?) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $300 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 Oceans rooms per night to rooms per night. Therefore, the income elasticity of demand is Oceans are from , meaning that hotel rooms at the If the price of a room at the Meadows were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Oceans from rooms per night. Because the cross-price elasticity of demand is rooms per night to , hotel rooms at the Oceans and hotel rooms at the Meadows are Oceans is debating decreasing the price of its rooms to $275 per night. Under the initial demand conditions, you can see that this would cause its tota revenue to . Decreasing the price will always have this effect on revenue when Oceans is operating on the portion of its demand curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:PRICE (Dollars per room)
500
450
400
350
300
250
200
150
100
50
0
0
Demand
+
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
Graph Input Tool
Market for Oceans's Hotel Rooms
Price
(Dollars per room)
Quantity
Demanded
(Hotel rooms per
night)
Demand Factors
Average Income
(Thousands of
dollars)
Airfare from DSM to
ACY
(Dollars per
roundtrip)
Room Rate at
Meadows
(Dollars per night)
300
200
40
200
rooms per night to
,hotel rooms at the Oceans and hotel rooms at the Meadows are
200
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $300 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 Oceans
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
Oceans are
?
from
meaning that hotel rooms at the
If the price of a room at the Meadows were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the
quantity of rooms demanded at the Oceans
from
rooms per night. Because the cross-price elasticity of
demand is
Oceans is debating decreasing the price of its rooms to $275 per night. Under the initial demand conditions, you can see that this would cause its total
. Decreasing the price will always have this effect on revenue when Oceans is operating on the
revenue to
portion of its
demand curve.
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