9. Application - Elasticity and hotel rooms The following graph input tool shows the daily demand for hotel rooms at the Peacock 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 Canadian household income $50,000 per year Roundtrip airfare from Calgary (YYC) to Las Vegas (LAS) $100 per roundtrip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per nightUse 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 Peacock's Hotel Rooms 450 Price 200 ( Dollars per room) 400 Quantity 300 350 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 YYC to 100 LAS (Dollars per 0 50 100 150 200 250 300 350 400 450 500 roundtrip) QUANTITY (Hotel rooms) Room Rate at 250 Grandiose (Dollars per night) For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Peacock is charging $200 per room per night.[f average household income increases by 20%, from $50,000 to $60,000 per year, 'd're quantity of rooms demanded at the Peacock V from E rooms per night to E rooms per night. Therefore, the income elasticity of demand is V , meaning that hotel rooms at the Peacock are V . [f the price of an airline ticket from WC to LAS were to increase by 10%, from $100 to $110 roundtr'ip, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacock V from E rooms per night to \\:| rooms per night. Because the cross price elasticity of demand is V , hotel rooms at the Peacock and airline trips between WC and Les are V . Peacock is debating decreasing the price of its rooms to $1?5 per night. Under the initial demand condions, you can see that this would cause its total revenue to V . Decreasing the price will always have this effect on revenue when Peacock is operating on the V portion of its demand curve. If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock 7 from E rooms per night to |:| rooms per night. Therefore, the income elasticity of demand is V . meaning that w s at the Peacock are V . [f the price of an airline ticket from WC to LAS were to increase by 10%, from $100 to $110 roundtr'ip, while all other demand facto . at their initial values, the quantity of rooms demanded at the Peacock V from E rooms per night to E rooms per night. Because the cross- price elasticity of demand is V , hotel rooms at the Peacock and airline trips between WC and LAS are V . Peacock is debating decreasing the price of its rooms to $1?5 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 Peacock is operating on the 7 portion of its demand curve. [f average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock V from E rooms per night to \\:| rooms per night. Therefore, the income elascity of demand is v . meaning that hotel rooms at the other demand factors remain at their oms per night. Because the cross- Peacock are V . If the price of an airline ticket from WC to LAS were to increase by 10%, from $100 to $110 roundt initial values, the quantity of rooms demanded at the Peacock 7 from \\:| rooms per night t price elasticity of demand is V , hotel rooms at the Peacock and airline trips between WC and LAS are V . Peacock is debating decreasing the price of its rooms to $1}"5 per night. Under the initial demand condions, you can see that this would cause its total revenue to V . Decreasing the price will always have this eFfect on revenue when Peacock is operating on the 7 portion of its demand curve. If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock from rooms per night to rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Peacock are If the price o an inferior good om YYC to LAS were to increase by 10%, from $100 to $110 roundtrip, while all other demand factors remain at their initial values a normal good oms demanded at the Peacock from rooms per night to rooms per night. Because the cross- price elasticity of demand is , hotel rooms at the Peacock and airline trips between YYC and LAS are Peacock is debating decreasing the price of its rooms to $175 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 Peacock is operating on the portion of its demand curve.If the price of an airline ticket from YYC to LAS 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 Peacock V from rooms per night to rooms per night. Because the cross- price elasticity of demand is , hotel rooms at th ck and airline trips between YYC and LAS are falls Peacock is debating decreasing the price of its rooms to $175 rises t. Under the initial demand conditions, you can see that this would cause its total revenue to . Decreasing the price will always nave this effect on revenue when Peacock is operating on the portion of its demand curve.If the price of an airline ticket from YYC to LAS 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 Peacock from rooms per night to rooms per night. Because the cross- price elasticity of demand is , hotel rooms at the Peacock and airline trips between YYC and LAS are Peacock is debating decreasi negative of its rooms to $175 per night. Under the initial demand conditions, you can see that this would cause its total revenue to positive Pasing the price will always have this effect on revenue when Peacock is operating on the portion of its demand curve.If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Peacock V from E rooms per night to \\:| rooms per night. Therefore, the income elascity of demand is V . meaning that hotel rooms at the Peacock are 7 . If the price of an airline ticket from WC to LAS were to increase by 10%. from $100 to $110 roundtn'p, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Peacock v from E rooms per night to \\:| rooms per night. Because the cross price elasticity of demand is V , hotel rooms at the Peacock and airline trips between WC and LAS are V . Peacock is debating decreasing the price of its rooms to $1?5 per night. Under the initial demand condions. you c. m ould cause its total revenue to V . Decreasing the price will always have this effect on revenue when Peacock is ope 7 portion of its demand curve. If the price of an airline ticket from WC to LAS were to increase by 10%, from $100 to $110 roundtn'p, while all other demand factors remain at their n - rooms demanded at the Peacock V from |:| rooms per night to |:| rooms per night. Because the cross- 7 , hotel rooms at the Peacock and airline trips between WC and LAS are V . initial values, th- price elasticity . Peacock is deba: g the price of its rooms to $1?5 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 Peacock is operating on the 7 portion of its demand curve. If the price of an airline ticket from WC to LAS 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 Peacock V from E rooms per night to I: rooms per night. Because the cross ' .'ty of demand is v , hotel rooms at the Peacock and airline trips between WC and LAS are v . hating decreasing the price of its rooms to $136 per night. Under the initial demand conditions, you can see that this would cause its I porh'on of its demand curve. ' to V . Decreasing the price will always have this effect on revenue when Peacock is operating on the v