20. Application: Elasticity and hotel rooms

The following graph input tool shows the daily demand for hotel rooms at the Oceans Hotel and Casino in Atlantic City, New Jersey. 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 $40,000 per year Roundtrip airfare from New Orleans (MSY) to Atlantic City (ACY) $100 per roundtrip Room rate at the Meadows Hotel and Casino, which is near the Oceans $250 per nightGraph Input Tool ? 500 Market for Oceans's Hotel Rooms 450 Price 100 (Dollars per room) 400 Quantity 400 350 Demanded (Hotel rooms per 300 night) 250 PRICE (Dollars per room) 200 Demand Factors 150 Demand Average Income 40 (Thousands of 100 dollars) 50 Airfare from MSY to 100 ACY ( Dollars per 0 50 100 150 200 250 300 350 400 450 500 roundtrip) QUANTITY (Hotel rooms) Room Rate at 250 Meadows (Dollars per night)