PRICE (Dollars per room) 500 450 400 350 300 250 200 150 Market for Big Winner's Hotel Rooms Price 300 (Dollars per room) Quantity 200 Demanded (Hotel rooms per night) Demand Factors Demand Average Income 50 (Thousands of 100 dollars) 50 Airfare from YYZ to 200 LAS 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) roundtrip) 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 $300 per room per night. from , meaning that hotel rooms at the If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Big Winner rooms per night to rooms per night. Therefore, the income elasticity of demand is Big Winner are good. If the price of an airline ticket from YYZ to LAS 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 Big Winner rooms per night to rooms per night. Because the cross- price elasticity of demand is from , hotel rooms at the Big Winner and airline trips between YYZ and LAS are Big Winner 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 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) 500 450 400 350 300 250 200 150 Market for Big Winner's Hotel Rooms Price 300 (Dollars per room) Quantity 200 Demanded (Hotel rooms per night) Demand Factors Demand Average Income 50 (Thousands of 100 dollars) 50 Airfare from YYZ to 200 LAS 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) roundtrip) 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 $300 per room per night. from , meaning that hotel rooms at the If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Big Winner rooms per night to rooms per night. Therefore, the income elasticity of demand is Big Winner are good. If the price of an airline ticket from YYZ to LAS 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 Big Winner rooms per night to rooms per night. Because the cross- price elasticity of demand is from , hotel rooms at the Big Winner and airline trips between YYZ and LAS are Big Winner 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 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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Question
Transcribed Image Text:PRICE (Dollars per room)
500
450
400
350
300
250
200
150
Demand
Graph Input 1001
Market for Big Winner's Hotel Rooms
Price
300
(Dollars per room)
Quantity
200
Demanded
(Hotel rooms per
night)
Demand Factors
Average Income
50
(Thousands of
100
dollars)
50
Airfare from YYZ to
200
LAS
0
(Dollars per
0
50 100 150 200 250 300 350 400 450 500
roundtrip)
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 $300 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 Big Winner
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
from
, meaning that hotel rooms at the
Big Winner are
good.
If the price of an airline ticket from YYZ to LAS 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 Big Winner
rooms per night to
rooms per night. Because the cross-
price elasticity of demand is
from
, hotel rooms at the Big Winner and airline trips between YYZ and LAS are
Big Winner 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 revenue to
. Decreasing the price will always have this effect on revenue when Big Winner is operating on the
portion of its demand curve.
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