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 dema factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $250 per round trip Room rate at the Lucky Hotel and Casino, which is near the Big Winner $200 per night
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 dema factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. (Note: All values are hypothetical.) Demand Factor Initial Value Average Canadian household income $50,000 per year Round trip airfare from Toronto (YYZ) to Las Vegas (LAS) $250 per round trip Room rate at the Lucky Hotel and Casino, which is near the Big Winner $200 per night
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
Choices for labelled parts:
1. Falls, rises
2. Negative, positive
3. An inferior good, a normal good
4. Falls, rises
5. Negative, positive
6. Complements, substitutes
7. Decrease, increase
8. Elastic, inelastic
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. (Note:
All values are hypothetical.)
Demand Factor
Initial Value
Average Canadian household income
$50,000 per year
Round trip airfare from Toronto (YYZ) to Las Vegas (LAS)
$250 per round trip
Room rate at the Lucky Hotel and Casino, which is near the Big Winner
$200 per night
Use the graph input tool to help you answer the following questions. You will not be scored 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 Input Tool
500
Market for Big Winner's Hotel Rooms
450
I Price
(Dollars per room)
350
400
Quantity
Demanded
(Hotel rooms per
night)
350
150
300
E 250
200
Demand Factors
E (Dollars per room)
Transcribed Image Text:400
Quantity
Demanded
(Hotel rooms per
night)
350
150
300
250
200
Demand Factors
150
Demand
Average Income
(Thousands of
dollars)
50
100
50
Airfare from YYZ to
LAS
(Dollars per round
trip)
250
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
Room Rate at Lucky
(Dollars per night)
200
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Big Winner 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 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
3.
If the price of an airline ticket from YYZ to LAS were to increase by 20%, from $250 to $300 round trip, 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 YYZ and LAS are
Big Winner 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
キ。
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)
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