The following graph input tool shows the daily demand for hotelrooms at the Peacock Hotel and Casino in Las Vegas, Nevada. To helpthe hotel management better understand the market, an economistidentified three primary factors that affect the demand for roomseach night. These demand factors, along with the valuescorresponding to the initial demand curve, are shown in thefollowing table and alongside the graph input tool.
Demand Factor
Initial Value
Use the graph input tool to help you answer the followingquestions. You will not be graded on any changes you make to thisgraph.
Note: Once you enter a value in a white field, the graph and anycorresponding amounts in each grey field will changeaccordingly.
- 9 Application Elasticity And Hotel Rooms The Following Graph Input Tool Shows The Daily Demand For Hotel Rooms At The 1 (32.16 KiB) Viewed 9 times
If average household income increases by 25%, from $40,000 to$50,000 per year, the quantity of rooms demanded at the Peacockfalls or rises from_____ rooms per nightto ____ rooms per night. Therefore, theincome elasticity of demand is negative orpositive, meaning that hotel rooms at the Peacock arean inferior good or a normal good.
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 theirinitial values, the quantity of rooms demanded at thePeacock falls orrises from _____ rooms pernight to _____ rooms per night. Becausethe cross-price elasticity of demand is , hotelrooms at the Peacock and hotel rooms at the Grandiose arecomplements or substitutes.
Peacock is debating decreasing the price of its rooms to $125per night. Under the initial demand conditions, you can see thatthis would cause its total revenue to decrease orincrease. Decreasing the price will always have thiseffect on revenue when Peacock is operating on the elasticor inelastic portion of its demand curve.
PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 0 0 Demand + 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Peacock's Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from JFK to LAS (Dollars per roundtrip) Room Rate at Grandiose (Dollars per night) 150 350 40 100 200 (?.