The following graph input tool shows the daily demand for hotel rooms at the Queens, Hotel and Casino in Atlantic City, New Jersey. To help the hotel management, better understand the market, and 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 impact. Demand factor and initial values average American household income equals 50,000 per year round-trip airfare from Pittsburgh to Atlantic City $200 per round-trip room rate at the meadows Hotel and Casino which is near the ocean 250 per night.

430 Price 350 (Dollars per room) Quantity Demanded 150 (Hotel rooms per night) PRICE (Dollars per room) Demand Factors Demand Average Income (Thousands of dollars) 50 Alrfare from PIT to ACY 200 (Dollars per roundtrip) 0 50 100 150 200 250 300 350 400 450 500 Room Rate at Meadows 250 QUANTITY (Hotel rooms) (Dollars per night) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $350 per room per night. If average household Income Increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Oceans from rooms per night to rooms per night. Therefore, the Income elasticity of demand Is meaning that hotel rooms at the Oceans are If the price of an alrline ticket from PIT to ACY were to Increase by 10%, from $200 to $220 roundtrip, while all other demand factors remain at their Initial values, the quantity of rooms demanded at the Oceans _ from rooms per night to rooms per night. Because the cross-price elasticity of demand Is ,hotel rooms at the Oceans and airline trips between PIT and ACY are Oceans 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 revenue to . Decreasing the price will always have this effect on revenue when Oceans is operating on the portion of Its demand curve