Question
please help on bo
th pages
Income and cross-price elasticity for hotel rooms Suppose the blue line on the following calculator shows the demand for hotel rooms at the Peacock Hotel and Casino in Las Vegas, Nevada. Three factors that affect the demand for rooms at the Peacock are the average American household income, the roundtrip airfare from New York (JFK) to Las Vegas (LAS), and the room at the Grandiose Hotel and Casino, which is near the Peacock. Use calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator. Tool tip: Use your mouse to drag the green line on the graph. The values in the boxes on the right side of the calculator will change accordingly. You can also directly change the values in the boxes with the white backgrounds by clicking in one of the boxes and typing. The graph and any related values will change accordingly. Suppose all the demanded shifters are at their initial values (average income is $50,000 per night). If the Peacock were currently charging $100 per night, it would be operating on the portion of the demanded curve, and lowering its price would its total revenue. (Hint: What happens if the Peacock drops its price by $10?) Suppose that the Peacock is currently charging $150 per night, airfare from New York is $100 roundtrip (its initial value), and the Grandiose is charging $150 per night (its initial value). If average household income were to increase by approximately 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock would rise from 300 to 340 per night - an increase of 13%. Therefore the income elasticity of demanded would be 1.3. Thus, you may conclude that hotel rooms at the Peacock are from the fact that the income elasticity of demand is . Suppose that the Peacock is currently charging $150 per night, average household income is $50,000 (its initial value), and airfare from New York is $100 roundtrip (its initial value). If the price of a room at the Grandiose were to decrease by 10%, from $150 to $135, the quantity of rooms demanded at the Peacock would fall from 300 to 270 per night a decrease of 10%. Therefore, the cross-price elasticity of demanded between these two goods is 1.0. Thus, You may conclude that hotel rooms at the Peacock and hotel rooms at the Grandiose are from the fact that the cross-price elasticity of demand is
Explanation / Answer
A- OPERATING ON THE LOWER PORTION OF DEMAND CURVE
B-INCREASE
C- NORMAL(NEITHER SUPERIOR NOR INFERIOR
D- GREATER THAN 1,
E- SUBSTITUES,
F- POSITIVE
