is Tipss TipsJTThe following graph input tool shows the daily demand for hotel rooms at the Lakes Hotel and Casino in Atlantic City, New Jersey. To help the hotelmanagement better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demandfactors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool.Demand FactorAverage American household incomeRoundtrip airfare from Des Moines (DSM) to Atlantic City (ACY)Room rate at the Mountaineer Hotel and Casino, which is near the LakesUse 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.PRICE (Dollars per room)5004504003503002502001501005000Demand50 100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Graph Input ToolMarket for Lakes's Hotel RoomsPrice(Dollars per room)QuantityDemanded(Hotel rooms pernight)Initial Value$40,000 per year$200 per roundtrip$250 per nightDemand FactorsAverage Income(Thousands ofdollars)Airfare from DSM toACY(Dollars perroundtrip)Room Rate atMountaineer(Dollars per night)35015040200250?For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $350 per room pernight.If average household income increases by 50%, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Lakes fromrooms per night torooms per night. Therefore, the income elasticity of demand ismeaning that hotel rooms at the Lakes areIf the price of a room at the Mountaineer were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values,the quantity of rooms demanded at the Lakes fromrooms per night torooms per night. Because the cross-price elasticity ofdemand ishotel rooms at the Lakes and hotel rooms at the Mountaineer areLakes 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 totalrevenue toDecreasing the price will always have this effect on revenue when Lakes is operating on theportion of itsdemand curve.

The income elasticity of demand is a formula used to determine how sensitive a good's demand is to…

The following graph input tool shows the daily demand for hotel rooms at the Lakes 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 Average American household income Roundtrip airfare from Des Moines (DSM) to Atlantic City (ACY) Room rate at the Mountaineer Hotel and Casino, which is near the Lakes 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. PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 0 0 7 Demand 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Lakes's Hotel Rooms Price (Dollars per room) Quantityd Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Initial Value $40,000 per year $200 per roundtrip $250 per night Airfare from DSM to ACY (Dollars per roundtrip) Room Rate at Mountaineer (Dollars per night) 350 150 40 200 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $350 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 Lakes from rooms per night to rooms per night. Therefore, the income elasticity of demand is meaning that hotel rooms at the Lakes are If the price of a room at the Mountaineer were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes from rooms per night to rooms per night. Because the cross-price elasticity of demand is Y , hotel rooms at the Lakes and hotel rooms at the Mountaineer are Lakes 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 Decreasing the price will always have this effect on revenue when Lakes is operating on the revenue to portion of its demand curve.