Attempts: 2 1.8 Keep the Highest 2/3 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. Initial Value Demand Factor Average American household Income Roun airfare from New York (JFK) to Las Vegas (LAS) Room rate at the Grandiose Hotel and Casino, which is near the Peacock $50,000 per year $200 per roundtrip $200 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 feld, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool 500 Market for Peacock's Hotel Rooms 150 400 Price (Dollars per room) Quantity Demanded (Hotel rooms per night 350 per room 100 MacBook Air Homework (Ch 05) 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. Graph Input Tool son Market for Peacock's Hotel Rooms 450 Price 150 (Dollars per room) Quantity Demanded (Hotel rooms per night) 350 300 PRICE (Dolars per room 250 Demand Factors 450 Demand 50 100 D 200 Average Income (Thousands of dollars) Airfare from JFK to LAS (Dollars per roundtrip) Room Rate at Grandiose (Dollars per night) O SO 100 150 200 2500 350 400 450 500 QUANTITY (Hotel rooms) 200 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $150 per room per night. If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock from rooms per night to rooms per night. Therefore, the income elasticity of demand is meaning that hotel rooms at the Homework (Ch 05) (Hotel rooms per night) PRICE (Dollar per roc Dernand Factors 150 bemand 50 50 200 Average Income (Thousands of dollars) Airfare from JFK to LAS (Dollars per roundtrip) Room Rate at Grandiose (Dollars per night) 0 G 500 150 200 2500 350 400 450 500 QUANTITY (Hotel rooms) 200 For each of lowing scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $150 per room per night 11 average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock from rooms per night to rooms per night. Therefore, the income elasticity of demand is meaning that hotel rooms at the Peacock are If the price of a room at the Grandiose were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacock from rooms per night to rooms per night. Because the cross-price elasticity of demand is V hotel rooms at the Peacock and hotel rooms at the Grandiose are Peacock is debating decreasing the price of its rooms to $125 per night. Under the initial demand conditions. Iyou can see that this would cause its total revenue to Decreasing the price will always have this effect on revenue when Peacock is operating on the portion of its demand curve. Grade it Now Save & Continue Continue without saving