9. Application Elasticity and hotel rooms The following graph input tool shows the daily.r demand for hotel rooms at the Big Winner Hotel and ICasino in Las Vegas, Nevada. To help the hotel management better understand the marl-:etJ 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 curveJ are shown in the following table and alongside the graph input tool. Demand Factor Initial Value Average Canadian household income $40,000 per year Rnundtrip airfare [rem Toronto (W2) to Leo Vegas (LAB) $200 per roundtrip Room rate at the Lucky Hotel and Casino, which is near the Big Winner 5200 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 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 40 (Thousands of 100 dollars) 50 Airfare from YYZ to 200 LAS 0 (Dollars per 0 50 100 150 200 250 300 350 400 450 500 roundtrip) QUANTITY (Hotel rooms) Room Rate at Lucky 200 (Dollars per night)For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Big Winner is charging $200 per room per night. If avemge household income increases by 50%, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Big Winner 7 From |:| rooms per night to I:| rooms per night. Therefore, the income elasticit'guI of demand is 'F , meaning that hotel rooms at the Big Winner are 7 good. If the price of a room at the LucltcscI were to decrease by 20%, from $200 to $150, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Big Winner 'P from: rooms per night to |:I rooms per night. Because the cross-price elasticit',.I of demand is V , hotel rooms at the Big Winner and hotel rooms at the Luck-3.r are V . Big Winner 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 Big Winner is operating on the 'I' portion of its demand curve