9. Application: Elasticity and hotel rooms The following graph input tool shows

Question

9. Application: Elasticity and hotel rooms 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 Factor Average American household income Roundtrip airfare from New York (JFK) to Las Vegas (LAS) Room rate at the Lucky Hotel and Casino, which is near the Big Winner $250 per night Initial Value $50,000 per year $100 per roundtrip 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

Explanation / Answer

a) Rises. ( because income increase, the demand for big winner hotel room increase at each price.)

b) 300 to 350 rooms per night.

c) Positive. ( because with increase in income , quantity demanded is increase)

d) Normal good.( because income effect for normal good is positive)

e) Fall . ( because they are complement good , increase in one price cause to decrease the quantity demanded for big winner hotel room)

f) 300 to 250 rooms per night.

g) Negative.

h) Complements.

i) Decreases.

j) Elastic.

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