9. Application: Elasticity and hotel roomsThe 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 hotelmanagement better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These demandfactors, 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 Los Angeles (LAX) to Las Vegas (LAS)$100 per roundtripRoom rate at the Exhilaration Hotel and Casino, which is near the Triple Sevens$250 per nightUse 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 ToolMarket for Triple Sevens's Hotel Rooms500450I Price(Dollars per room)200400QuantityDemanded(Hotel rooms pernight)300350300250Demand Factors8 200Average Income(Thousands of50150Demand100dollars)Airfare from LAX toLAS(Dollars perroundtrip)10050++50 100 150 200 250 300 350 400 450 500Room Rate atExhilaration(Dollars per night)250QUANTITY (Hotel rooms)For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Triple Sevens is charging $200 perroom per night.If average household income increases by 20%, from $50,000 to s60,000 per year, the quantity of rooms demanded at the Triple Sevensv fromrooms per night torooms per night. Therefore, the income elasticity of demand is, meaning that hotel rooms at theTriple Sevens areIr the price of an airline ticket from LAX to LAS were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at theirinitial values, the quantity of rooms demanded at the Triple Sevens v fromrooms per night torooms per night. Because thecross-price elasticity of demand is, hotel rooms at the Triple Sevens and airline trips between LAX and LAS areTriple Sevens is debating decreasing the price of its rooms to $175 per night. Under the initial demand conditions, you can see that this would causeits total revenue to-. Decreasing the price will always have this effect on revenue when Triple Sevens is operating on thev portion of its demand curve.PRICE (Dolars per room)

Income Elasticity of Demand is defined as the degree of responsiveness of a quantity demanded for a…

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 corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool.

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 corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool.

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 3.6P: (Price Elasticity of Supply) Calculate the price elasticity of supply for each of the following...

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Similar questions

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