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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

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 Average American household Income Roundtrip airfare from San Francisco (SFO) to Las Vegas (LAS) Room rate at the Grandiose Hotel and Casino, which is near the Peacock Initial Value $40,000 per year $100 per roungtrip $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 the Ananter a value in a white field, the graph and any corresponding amounts in each grey field will change according
Graph Input Tool 500 Market for Peacock's Hotel Rooms 450 400 300 350 Price (Dollars per room) Quantity Demanded (Hotel rooms per night) 200 300 PRICE (Dolars per room) 250 200 Demand Factors 150 Der and 40 100 50 100 Average Income (Thousands of dollars) Airfare from SFO to LAS Dollars per round Room Rate at Grandiose (Dollars per night 0 B0100 150 200 200 300 350 400 450 500 QUANTITY (Hotel rooms 250 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
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 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Peacock rises from 200 rooms per night to 250 rooms per night. Therefore, the income elasticity of demand is positive meaning that hotel rooms at the Peacock are a normal good If the price of a room at the Grandiose were to decrease by 20%, from $250 to $200, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacock falls from 250 rooms per night to 200 rooms per night. Because the cross-price elasticity of demand is negative hotel rooms at the Peacock and hotel rooms at the Grandiose are complements Peacock is debating decreasing the price of its rooms to 5275 per night. Under the initial demand conditions, you can see that this would cause its total revenue to Increase Decreasing the price will always have this effect on revenue when Peacock is operating on the elastic portion of its demand curve.

Apr 16 2021 View more View Less

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