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Attempts: Score: 18 7. Application: Elasticity and hotel rooms 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 D Demand Factor Average American household income Round trip airfare from Los Angeles (LAX) to Las Vegas (LAS) Room rate at the Grandiose Hotel and Casino, which is near the Peacock Initial Value $50,000 per year $100 per round trip $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. 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 2 500 Market for Peacock's Hotel Rooms 450 400 200 350 Price (Dollars per room) Quantity Demanded (Hotel rooms per night) 300 300 PRICE (Dollars per room) 250 200 150 Demand 50 100 Demand Factors Average Income (Thousands of dollars) Airfare from LAX to LAS (Dollars per round trip) Room Rate at Grandiose (Dollars per night) 50 100 0 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) L250 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Peacock is charging $200 per room per night from If average household Income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock__ rooms per night to rooms per right. Therefore, the income elasticity of demand is meaning that hotel rooms at the Peacock are If the price of a room at the Grandiose were to decrease by 10%, from $250 to $225, 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 hotel rooms at the Grandiose are Peacock is debating decreasing the price of its rooms to $175 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

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