On the drop down menus: Peacock —- Falls or rises Demand —- negative or positive

Question

On the drop down menus: Peacock —- Falls or rises Demand —- negative or positive Peacock are —- an inferior good or a normal good
Peacock —- falls or rises Demand is —- negative or positive Lax and Las are —- substitutes or compliments Revenue to —- decrease or increase Peacock is operating on the —- elastic or in elastic
9. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock 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 Average American household income Roundtrip airfare from Los Angeles (LAX) to Las Vegas (LAS) Room rate at the Grandiose Hotel and Casino, which is near the Peacock Initial Value 50,000 per year $200 per roundtrip $200 per night Use the graph input tool to help you answer the folowing questions. You wil not be graded on any changes you make to this graph. Note: Once you enter a value in a white feld, the graph and any corresponding amounts in each grey field will change accordingly Graph Input Tool

Explanation / Answer

) With the increase in income the demand will shift rightward.

Quantity demanded will increase from 300 to 400rooms per night.

Income elasticity is less than 1 (100/20000)*(40000/300)= 0.67.

Hotel rooms at the big winner are inferior goods.

2) Quantity demanded will decrease(because the two goods are perfect substitutes).

Demand will decrease from 300 to 200.

(Cross-price elasticity = (0.33/0.2) = -1.65)

Cross -price elasticity is less than 1. Hotel rooms aresubstitutes.

3) Price Elasticity = 0.67 demand is inelastic. Total revenue will decrease, inelastic.

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