Fill in the blanks are in order: (Falls, rises) (Negative, positive) (An inferio

Question

Fill in the blanks are in order: (Falls, rises) (Negative, positive) (An inferior good, a normal good) (Falls, rises) (Negative, positive) (Complements, substitutes) (Decrease, increase) 9. Application: Elasticlty and hotel rooms 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. Demand Factor Average American household income Roundtrip airfare from San Francisco (SFO) to Las Vegas (LAS) Room rate at the Exhilaration Hotel and Casino, which is near the Triple Sevens Initial Value $40,000 per year $200 per roundtrip $200 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 accordingh

Explanation / Answer

1)Rooms demanded rise from 300 to 400

Additional Income = 60000-40000=20000

Rooms demanded =20000/200=100.

2) Income Elasticity of Demand = % change in Quantity demanded/% change in Income=0.25/0.5=0.5 (Positive)

3) Goods are normal as Income increases demand of rooms also increase.

4) Falls, from 200 to 150

5) Cross Price elasticity of Demad=% change in Quantity/% change in Price=25%/-20%=-1.25 Hence Negative.

6) Rooms at Exhileration and Rooms at Triple house are substitutes

7) Decreases, Inelastic

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