For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per room per night.If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Big Winner from rooms per night to rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Big Winner are . If the price of an airline ticket from LAX to LAS were to increase by 50%, from $100 to $150 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner from rooms per night to rooms per night. Because the cross-price elasticity of demand is , hotel rooms at the Big Winner and airline trips between LAX and LAS are . Big Winner is debating decreasing the price of its rooms to $325 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 Big Winner is operating on the portion of its demand curve. 250Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change200Graph Input ToolMarket for Big Winner's Hotel Rooms500450O Price(Dollars per room)350400150350Demanded(Hotel rooms pernight)6300Demand Factors150Demand,Average Income(Thousands ofdollars)50100/50Airfare from LAX toLAS(Doilers penroundtrip)10050 100 150 200 250 300 350 400 450 500QUANTITY (Hotel rooms)Room Rate at Lucky(Dollars per night)200esitphtodremPRICE (Dollarsper room) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 perroom per night.If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Big Winnerfromrooms per night torooms per night. Therefore, the income elasticity of demand is, meaning thathotel rooms at the Big Winner areIf the price of an airline ticket from LAX to LAS were to increase by 50%, from $100 to $150 roundtrip, while all other demand factors remain at theirinitial values, the quantity of rooms denmanded at the Big WinnerV fromrooms per night torooms per night. Because thecross-price elasticity of demand ishotel rooms at the Big Winner and ainine trips between LAX and LAS areBig Winner is debating decreasing the price of its rooms to $325 per night. Under the initial demand conditions, you can see that this would cause itstotal revenue toDecreasing the price will always have this effect on revenue when Big Winner is operating on theportion of its demand curve,

Market price of Big Winner rooms = $350 Market demand for Big Winner rooms = 150 rooms Average…

Answered: For each of the following scenarios,…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per room per night.

If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Big Winner from

rooms per night to

rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Big Winner are .

If the price of an airline ticket from LAX to LAS were to increase by 50%, from $100 to $150 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner from

rooms per night to

rooms per night. Because the cross-price elasticity of demand is , hotel rooms at the Big Winner and airline trips between LAX and LAS are .

Big Winner is debating decreasing the price of its rooms to $325 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 Big Winner is operating on the portion of its demand curve.

250
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change
200
Graph Input Tool
Market for Big Winner's Hotel Rooms
500
450
O Price
(Dollars per room)
350
400
150
350
Demanded
(Hotel rooms per
night)
6300
Demand Factors
150
Demand,
Average Income
(Thousands of
dollars)
50
100/
50
Airfare from LAX to
LAS
(Doilers pen
roundtrip)
100
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
Room Rate at Lucky
(Dollars per night)
200
esitphto
drem
PRICE (Dollarsper room)

For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per
room per night.
If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Big Winner
from
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
, meaning that
hotel rooms at the Big Winner are
If the price of an airline ticket from LAX to LAS were to increase by 50%, from $100 to $150 roundtrip, while all other demand factors remain at their
initial values, the quantity of rooms denmanded at the Big Winner
V from
rooms per night to
rooms per night. Because the
cross-price elasticity of demand is
hotel rooms at the Big Winner and ainine trips between LAX and LAS are
Big Winner is debating decreasing the price of its rooms to $325 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 Big Winner is operating on the
portion of its demand curve,

Expert Solution

Given:

Market price of Big Winner rooms = $350
Market demand for Big Winner rooms = 150 rooms
Average Income = $50,000
Airfare = $100
Room rate at Lucky = $200
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $350 per room per night.

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