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 New Orleans (MSY) to Atlantic City (ACY) Room rate at the Mountaineer Hotel and Casino, which is near the Lakes Initial Value $40,000 per year $250 per roundtrip $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. PRICE (Dollars per room) 500 450 400 350 300 250 200 Graph Input Tool Market for Lakes's Hotel Rooms Price 100 (Dollars per room) Quantity 400 Demanded (Hotel rooms per night) Demand Factors 150 Demand Average Income 40 (Thousands of 100 dollars) 50 Airfare from MSY to 250 ACY 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) roundtrip) Room Rate at Mountaineer (Dollars per night) 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $100 per room per night. from ,, meaning that hotel rooms at the Lakes are If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Lakes rooms per night to rooms per night. Therefore, the income elasticity of demand is If the price of a room at the Mountaineer were to decrease by 20%, from $250 to $200, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes. rooms per night to demand is from rooms per night. Because the cross-price elasticity of ,hotel rooms at the Lakes and hotel rooms at the Mountaineer are Lakes is debating decreasing the price of its rooms to $75 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 Lakes is operating on the 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
icon
Related questions
Question
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 New Orleans (MSY) to Atlantic City (ACY)
Room rate at the Mountaineer Hotel and Casino, which is near the Lakes
Initial Value
$40,000 per year
$250 per roundtrip
$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.
PRICE (Dollars per room)
500
450
400
350
300
250
200
Graph Input Tool
Market for Lakes's Hotel Rooms
Price
100
(Dollars per room)
Quantity
400
Demanded
(Hotel rooms per
night)
Demand Factors
150
Demand
Average Income
40
(Thousands of
100
dollars)
50
Airfare from MSY to
250
ACY
0
(Dollars per
0
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
roundtrip)
Room Rate at
Mountaineer
(Dollars per night)
250
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $100 per room per
night.
from
,, meaning that hotel rooms at the Lakes are
If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Lakes
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
If the price of a room at the Mountaineer were to decrease by 20%, from $250 to $200, while all other demand factors remain at their initial values,
the quantity of rooms demanded at the Lakes.
rooms per night to
demand is
from
rooms per night. Because the cross-price elasticity of
,hotel rooms at the Lakes and hotel rooms at the Mountaineer are
Lakes is debating decreasing the price of its rooms to $75 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 Lakes is operating on the
portion of its
demand curve.
Transcribed Image Text: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 New Orleans (MSY) to Atlantic City (ACY) Room rate at the Mountaineer Hotel and Casino, which is near the Lakes Initial Value $40,000 per year $250 per roundtrip $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. PRICE (Dollars per room) 500 450 400 350 300 250 200 Graph Input Tool Market for Lakes's Hotel Rooms Price 100 (Dollars per room) Quantity 400 Demanded (Hotel rooms per night) Demand Factors 150 Demand Average Income 40 (Thousands of 100 dollars) 50 Airfare from MSY to 250 ACY 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) roundtrip) Room Rate at Mountaineer (Dollars per night) 250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $100 per room per night. from ,, meaning that hotel rooms at the Lakes are If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Lakes rooms per night to rooms per night. Therefore, the income elasticity of demand is If the price of a room at the Mountaineer were to decrease by 20%, from $250 to $200, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes. rooms per night to demand is from rooms per night. Because the cross-price elasticity of ,hotel rooms at the Lakes and hotel rooms at the Mountaineer are Lakes is debating decreasing the price of its rooms to $75 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 Lakes is operating on the portion of its demand curve.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education