20. 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 Initial Value Average American household income $50,000 per year Roundtrip airfare from New York (JFK) to Las Vegas (LAS) $200 per roundtrip Room rate at the Lucky Hotel and Casino, which is near the Big Winner $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 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.Graph Input Tool 500 Market for Big Winner's Hotel Rooms 450 Price 300 (Dollars per room) 400 Quantity 200 350 Demanded (Hotel rooms per 300 night) PRICE (Dollars per room) 250 200 Demand Factors 150 Demand Average Income 50 (Thousands of 100 dollars) 50 Airfare from JFK to 200 LAS ( Dollars per 0 50 100 150 200 250 300 350 400 450 500 roundtrip) QUANTITY (Hotel rooms) Room Rate at Lucky 250 (Dollars per night)For each of the following scenarios, begin by assuming that all demand factors are set to their original value; and Big IWinner is charging $300 per room per night. If average household income Increases by 20%, from $50,000 to $60,000 per year, we quantity of rooms demanded at the Big Winner rises 7 from rooms per night to rooms per night. Therefore, we income elasticity of demand is V , meaning H1at hotel Big Winner are 7 . If the price of an airline ticket from JFK to LAS were to increase by 10%, from $200 to $220 roundtrip, while all other demand factors . their initial values, Hie quantity of rooms demanded at the Big lWinner V from rooms per night to rooms per night. Because the cross- prioe elasticity of demand is V , hotel rooms at the Big Winner and airline trips between JFK and LAS are V . Big Winner is debating decreasing the price of its rooms to $275 per night. Under the initial demand conditions, you can see that this would cause its total revenue to Y . Decreasing the price will always have this e'ect on revenue when Big Winner Is operating on the V portion of its demand curve