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. For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per room per night. If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Big Winner (rise or fall) from $ rooms per night to$ rooms per night. Therefore, the income elasticity of demand is (negative or postive) , meaning that hotel rooms at the Big Winner are (an inferior good or normal good) . 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 (falls or rises) from $ rooms per night to $ rooms per night. Because the cross-price elasticity of demand is (negative or postive) , hotel rooms at the Big Winner and airline trips between JFK and LAS are (complements or subsituties) . 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 total revenue to (decerease or increase) . Decreasing the price will always have this effect on revenue when Big Winner is operating on the (elastic or inelastic) portion of its demand curve.

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. For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per room per night. If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Big Winner (rise or fall) from $ rooms per night to$ rooms per night. Therefore, the income elasticity of demand is (negative or postive) , meaning that hotel rooms at the Big Winner are (an inferior good or normal good) . 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 (falls or rises) from $ rooms per night to $ rooms per night. Because the cross-price elasticity of demand is (negative or postive) , hotel rooms at the Big Winner and airline trips between JFK and LAS are (complements or subsituties) . 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 total revenue to (decerease or increase) . Decreasing the price will always have this effect on revenue when Big Winner is operating on the (elastic or inelastic) portion of its demand curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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.

For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per room per night.

If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Big Winner (rise or fall) from $ rooms per night to$ rooms per night. Therefore, the income elasticity of demand is (negative or postive) , meaning that hotel rooms at the Big Winner are (an inferior good or normal good) .

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 (falls or rises) from $ rooms per night to $ rooms per night. Because the cross-price elasticity of demand is (negative or postive) , hotel rooms at the Big Winner and airline trips between JFK and LAS are (complements or subsituties) .

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 total revenue to (decerease or increase) . Decreasing the price will always have this effect on revenue when Big Winner is operating on the (elastic or inelastic) portion of its demand curve.

Graph Input Tool
Market for Big Winner's Hotel Rooms
500
450
I Price
(Dollars per room)
350
400
Quantity
Demanded
(Hotel rooms per
night)
150
350
300
250
Demand Factors
200
150
Average Income
(Thousands of
dollars)
Demand
40
100
1.
Airfare from JFK to
LAS
(Dollars per
50
250
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
Room Rate at Lucky
(Dollars per night)
250
88°F A+
arch
hp
+-
8828
PRICE (Dollars per room)

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