The following graph input tool shows the daily demand for hotel rooms at the Tri
ID: 3210018 • Letter: T
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The following graph input tool shows the daily demand for hotel rooms at the Triple Sevens 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 coresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. Average American household income Roundtrip airfare from New York (JFK) to Las Vegas (LAs) Room rate at the Exhilaration Hotel and Casino, which is near the Triple Sevens 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 n 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 Triple Sevens is charging $150 per room per night average household income increases by 50%, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Triple Sevens- from©rooms per nght to rooms per night. Therefore, the income elasticity of demand is. menng that hotel rooms at the Triple Sevens are Ifthe 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 Triple Sevens-from~-roons peright toorooms per night. Because the cross-price elasticity of demand is , hotel rooms the Triple Sevens and airline trips between JFK and LAS are Triple Sevens is debating decreasing the price of its rooms to $125 per night. Under the nitial demand conditions, you can see that this would cause its total revenue to . Decreasing the price will always have this effect on revenue when mole Sevens is operating on the portion of as demand curve.Explanation / Answer
Image is not that clear, as per my understanding below is the answer. If the used values are not correct then please post the clear image
1. rises, from 200 to 250
Additional income = 60000 - 50,000 = 10000
Cost of 1 room = 200
Additional room that can be purchased = 10000/200 = 50
2. Income elasticity of demand = % change in quantity demanded / % change in income
% change in quantity demanded = (250 - 200)/200 X 100 = 25%
% change in income = 20%
Income Ed = 25/20 = 5/4 = 1.25
3. Normal goods because increase in income increases demand of hotel rooms
4. falls, 200 to 150
5. Cross price elasticity = % change in quantity demanded / % change in price of other good
% change in quantity demanded = (200 - 150)/150 X 100 = - 33.3%
% change in price of airplane ticket = 20%
Cross price elasticity = - 33.3/20 = - 1.67
6. Complements because they are jointly used. To reach hotel, person has to travel from airplane.
7. increases; elastic
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