6. Elasticity and total revenue The following graph illustrates the weekly demand curve for motorized scooters in Roanoke. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be graded on any changes made to this graph. On the following graph, use the green point (triangle symbol) to plot the weekly total revenue when the market price is $30, $45, $60, $75, $90, $105, and $120 per scooter.\f340 200 0 15 30 45 60 75 90 105 120 135 150 155 180 195 PRICE (Dollars per scooter) According to the midpoint method, the price elasticity of demand between points A and B is approximately V . \felastic inelastic e midpoint method, the price elasticity of demand between points A and B is approximately V . unit elastic ' rice of scooters is currently $45 per scooter, shown as point B on the initial graph. Because the demand between points A and B is V , a $15-per-scooter increase in price will lead to V in total revenue per week. According to the midpoint method, the price elasticity of demand between points A and B is approximately V . Suppose the price of scooters is currently $45 per scooter, shown as point B on the initial graph. Because the demand between points A and B is V , a $15-per-scooter increase in price will lead to V in total revenue per week. In general, in order for a price increase to cause a decrease in total revenue, demand must be '7 . a decrease According to the midpoint method, the price elasticity of demand b an increase . and B is approximately Y . no change Suppose the price of scooters is currently $45 per scooter, shown a e initial graph. Because the demand between points A and B is Y , a $15-per-scooter increase in price will lead to V in total revenue per week. If the price of an airline ticket from PIT to ACY were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes '7 from C] rooms per night to |:] rooms per night. Because the cross-price elasticity of demand is V , hotel rooms at the L E . airline trips between PIT and ACY are Y . Lakes is debating decreasing the price of its rooms to $125 rises t. Under the initial demand conditions, you can see that this would cause its total For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $150 per room per night. If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes '7 from |:] rooms per night to C] rooms per night. Therefore, the income elasticity of demand is V , meaning that hotel rooms at the Lakes are v If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes V from C] rooms per night to |:] rooms per night. Therefore, the income eiasticity of demand is V , meaning that hotel ro- - e Lakes are falls Y rises According to the midpoint method, the price elasticity of demand between points A and B is ap Suppose the price of scooters is currently $45 per scooter, shown as point B on the initial grap inelastic demand between points A and B is V , a $15-per-scooter increase in price will lead to V in total r. ek. unit elastic In general, in order for a price increase to cause a decrease in total revenue, demand must be V . If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes Y from rooms per night to |:] rooms per night. Therefore, the income elasticity of demand is V , meaning that hotel rooms at the Lakes are V ' an inferior good antity of rooms demanded at the Lakes Y from |:] rooms per night to |:] rooms per night. Because the cross-price line ticket from PIT to ACY were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Lakes Y from |:] rooms per night to C] rooms per night. Therefore, the income elasticity of demand is V , meaning that hotel rooms at the Lakes are If the price of an airline ticket from PIT to ACY were to increase by 10%, from $100 to $11 positive V while all other demand factors remain at their elasticity 0' decrease Y , hotel rooms at the Lakes and airline trips between PIT and ACY are V . Lakes is de revenue to -sing the price of its rooms to $125 per night. Under the initial demand conditions, you can see that this would cause its total V . Decreasing the price will always have this effect on revenue when Lakes is operating on the V portion of its demand curve. If the price ofan airline ticket from PIT to ACY were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes T from |:] rooms per night to C] rooms per night. Because the cross-price elasticity of demand is V , hotel rooms at the Lakes and airline trips between PIT and ACY are 7 . positive Lakes is debating decr rice of its rooms to $125 per night. Under the initial demand conditions, you can see that this would cause its total revenue to -asing the price will always have this effect on revenue when Lakes is operating on the 7 portion of its If the price of an airline ticket from PIT to ACY were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes 'V from C] rooms per night to |:] rooms per night. Because the cross-price elasticity of demand is V , hotel rooms at the Lakes and airline trips between PIT and ACY are V . Lakes is debating decreasing the price of its rooms to $125 per night. Under the initial demand conditions, you can see that this would cause its total revenue to 'V . Decreasing the price will always have this effect on revenue when Lakes is operating on the V portion of its demand curve. If the price of an airline ticket from PIT to ACY were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes V From S rooms per night to C] rooms per night. Because the cross-price elasticity of demand is V , hotel rooms at the Lakes and airline trips between PIT and ACY are V . revenue to Y . Decreasing the price will always have this effect on revenue when Lakes is op complements Y portion of its Lakes is debating decreasing the price of its rooms to $125 per night. Under the initial demand conditions, substltutes this would cause its total demand curve. elasticity of demand is V , hotel rooms at the Lakes and airline trips between PIT and ACY are inelastic Lakes is debating decreasing the price of its rooms to $125 per night. Under the initial demand conditions, you can see t revenue to d cause its total Y . Decreasing the price will always have this effect on revenue when Lakes is operating on the V portion of its demand curve. Using the midpoint method, the price elasticity of demand for walnuts between the price levels of $20 and $12 per ton is Y , meaning that between these two points, demand is V . Thus, you can conclude that the grower's claim is Y , becau revenue will V due to the technological improvement. Conrm your previous conclusion by calculating total revenue in the walnut market before and after the technological I'm nt. Enter these Several growers are happy with this advancement in technology because now they can sell more crops, which they believe will lead to increases in revenue. Using elasticities, you will be able to determine whether this price change will lead to a rise or fall in total revenue in this market. Using the midpoint method, the price elasticity of demand for walnuts between the price levels of $20 and $12 per ton is 'V , meaning that between these two points, demand is V . Thus, you can conclude that the grower's claim is V , because total revenue will V due to the technological improvement. Using the midpoint method, the price elasticity of demand for walnuts between the price levels of $20 and $12 per ton is Y , meaning that between these two points, demand is V . Thus, you can conclude that the grower's claim is V , because total revenue will elastic V due to the t provement. inelastic unit elastic 14. Application: Demand elasticity and agriculture The following graph illustrates the market for walnuts. 1t plots the monthly supply of walnuts and the monthly demand for walnuts. Suppose new gathering technology is invented, allowing growers to produce more crops using the same amount of resources. Show the effect this shock has on the market for walnuts by shifting the demand curve, supply curve, or both. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. 40 O Demand 32 Supply O 24 Supply PRICE (Dollars per ton) 16 Demand 8 0 0 8 16 24 32 40 QUANTITY (Thousands of tons)Confirm your previous conclusion by calculating total revenue in the walnut market before and after the technological improvement. Enter these values in the following table. Before Technological Improvement After Technological Improvement Total Revenue (Thousands of Dollars)Using the midpoint method, the price elasticity of demand for walnuts between the price levels of $20 and $12 per ton is V , meaning that between these two points, demand is V . Thus, you can conclude that the grower's claim is V , because total revenue will correct V due to the technological improvement. incorrect Using the midpoint methodr the price elasticity of demand for walnuts between the price levels of $20 and $12 per ton is V , meaning that between these two points, demand is Y . Thus, you can conclude that the grower's claim is Y , because total revenue will V due to the technological improvement. increase decrease 9. Application: Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Lakes 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 $50,000 per year Roundtrip airfare from Pittsburgh (PIT) to Atlantic City (ACY) $100 per roundtrip Room rate at the Mountaineer Hotel and Casino, which is near the Lakes $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 eld will change accordingly. Graph Input Tool ? Market for Lakes's Hotel Rooms 500 450 Price 150 (Dollars per room) 400 Quantity 350 350 Demanded (Hotel rooms per 300 night) 250 PRICE (Dollars per room) 200 Demand Factors 150 Demand Average Income 50 (Thousands of 100 dollars) 50 Airfare from PIT to 100 ACY 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 roundtrip) QUANTITY (Hotel rooms) Room Rate at 250 Mountaineer (Dollars per night)