The following graph input tool shows the daily demand for hotel rooms at the Big Winner 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 FactorInitial ValueAverage American household income$50,000 per yearRoundtrip airfare from San Francisco (SFO) to Las Vegas (LAS)$250 per roundtripRoom rate at the Lucky Hotel and Casino, which is near the Big Winner$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. Graph Input ToolMarket for Big Winner's Hotel Rooms500I Price(Dollars per room)450350400QuantityDemanded(Hotel rooms pernight)150350300250Demand Factors200150Average Income(Thousands ofdollars)Demand50100Airfare from SFO toLAS(Dollars perroundtrip)5025050100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Room Rate at Lucky(Dollars per night)200PRICE (Dollars per room) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 perroom per night.If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Big Winnerfromrooms per night to|rooms per night. Therefore, the income elasticity of demand ismeaning thathotel rooms at the Big Winner areIf the price of an airline ticket from SFO to LAS were to increase by 20%, from $250 to $300 roundtrip, while all other demand factors remain at theirinitial values, the quantity of rooms demanded at the Big Winner|rooms per night to lrooms per night. Because the cross-fromprice elasticity of demand is, hotel rooms at the Big Winner and airline trips between SFO and LAS areBig Winner is debating decreasing the price of its rooms to $325 per night. Under the initial demand conditions, you can see that this would cause itstotal revenue to. Decreasing the price will always have this effect on revenue when Big Winner is operating on theportion of its demand curve.

Question

The following graph input tool shows the daily demand for hotel rooms at the Big Winner 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 FactorInitial ValueAverage American household income$50,000 per yearRoundtrip airfare from San Francisco (SFO) to Las Vegas (LAS)$250 per roundtripRoom rate at the Lucky Hotel and Casino, which is near the Big Winner$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. Graph Input ToolMarket for Big Winner's Hotel Rooms500I Price(Dollars per room)450350400QuantityDemanded(Hotel rooms pernight)150350300250Demand Factors200150Average Income(Thousands ofdollars)Demand50100Airfare from SFO toLAS(Dollars perroundtrip)5025050100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Room Rate at Lucky(Dollars per night)200PRICE (Dollars per room) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 perroom per night.If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Big Winnerfromrooms per night to|rooms per night. Therefore, the income elasticity of demand ismeaning thathotel rooms at the Big Winner areIf the price of an airline ticket from SFO to LAS were to increase by 20%, from $250 to $300 roundtrip, while all other demand factors remain at theirinitial values, the quantity of rooms demanded at the Big Winner|rooms per night to lrooms per night. Because the cross-fromprice elasticity of demand is, hotel rooms at the Big Winner and airline trips between SFO and LAS areBig Winner is debating decreasing the price of its rooms to $325 per night. Under the initial demand conditions, you can see that this would cause itstotal revenue to. Decreasing the price will always have this effect on revenue when Big Winner is operating on theportion of its demand curve.

Accepted Answer

Part A
If average household income increases by 20%, from $50,000 to 60,000 per year, the number of…

Demand Factor	Initial Value
Average American household income	$50,000 per year
Roundtrip airfare from San Francisco (SFO) to Las Vegas (LAS)	$250 per roundtrip
Room rate at the Lucky Hotel and Casino, which is near the Big Winner	$200 per night