For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $300 per room per night. from If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock 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 an airline ticket from SFO to LAS 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 Peacock from rooms per night. Because the cross- price elasticity of demand is rooms per night to hotel rooms at the Peacock and airline trips between SFO and LAS are Peacock is debating decreasing the price of its rooms to $275 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 Peacock is operating on the portion of its demand curve.
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $300 per room per night. from If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock 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 an airline ticket from SFO to LAS 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 Peacock from rooms per night. Because the cross- price elasticity of demand is rooms per night to hotel rooms at the Peacock and airline trips between SFO and LAS are Peacock is debating decreasing the price of its rooms to $275 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 Peacock is operating on the portion of its demand curve.
Chapter11: Resource Market
Section: Chapter Questions
Problem 5.8P
Related questions
Question
Transcribed Image Text:200
50
Allare non so to
LAS
(Dollars per
0
roundtrip)
0 50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
250
Room Rate at
Grandiose
(Dollars per night)
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $300 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 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 an airline ticket from SFO to LAS 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 Peacock from
rooms per night to
rooms per night. Because the cross-
price elasticity of demand is
hotel rooms at the Peacock and airline trips between SFO and LAS are
1
Peacock is debating decreasing the price of its rooms to $275 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 Peacock is operating on the
portion
of its demand curve.
G
F4
F5
F6
F8
M.
77°F
Sunny
F1
F2
F3
:0+
28
Ø
F7
51-
F9
F10
F11
512
Transcribed Image Text:Homework (Ch 05)
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
Initial Value
$50,000 per year
Average American household income
Roundtrip airfare from San Francisco (SFO) to Las Vegas (LAS)
$200 per roundtrip
Room rate at the Grandiose Hotel and Casino, which is near the Peacock
$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.
Graph Input Tool
500
Market for Peacock's Hotel Rooms
450
Price
300
400
(Dollars per room)
Quantity
Demanded
200
(Hotel rooms per
77°F
Sunny
350
+++
C
-
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