Q1

Suppose that when household income inMinneapolis rises by 2%, and the price ofinstant noodles remains unchanged, the quantity demanded ofinstant noodlesdecreases by 20%.Calculatethe income elasticity of demand forinstant noodles in Minneapolis. What kind of good is instant noodles in Minneapolis?

Q2

1. The following graph 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. (45 points)

Demand Factor Initial Value Average American household income $50,000 per year Round trip airfare from Los Angeles (LAX) to Las Vegas (LAS) $100 per round trip Room rate at the Grandiose Hotel and Casino, which is near the Peacock $250 per nightMarket for Peacock's Hotel Rooms 500 450 Price 200 (Dollars per room) 400 Quantity Demanded 300 350 (Hotel rooms per 300 night) 250 PRICE (Dollars per room) Demand Factors 200 Average Income 150 50 Demand (Thousands of dollars) 100 Airfare from LAX to 100 LAS 50 (Dollars per round trip) 0 Room Rate at 0 50 100 150 200 250 300 350 400 450 500 250 Grandiose QUANTITY (Hotel rooms) (Dollars per night)PRICE (Dollars per room) Market for Peacock's Hotel Rooms 500 - 450 |] Price 200 (Dollars per room) 40 , Quantity 350 Demanded 400 -. (flare! rooms per 300 night) 250 \"(1.02 Demand Factors 200 + | Average Income 55 150 DI ., ( Thousands of dollars) 100 I1 Airfare from LAX to 100 I LAS 50 I (Dollars per round I trip) 0 . I I I I I I I I ' Room Rate at 250 0 50 100 150 200 250 300 350 400 450 500 Grandiose QUANTITY (Hotel rooms) (Dollars per night)