(Answered) 7. Application: Elasticity and hotel roomsThe following graph input tool shows the daily demand for…

7. Application: Elasticity and hotel rooms
The following graph input tool shows the daily demand for hotel rooms at the Triple Sevens Hotel and Casino in Las Vegas, Nevada. To help the management better understand the market, an economist identified three primary factors that affect the demand for rooms each night. These d factors, along with the values corresponding to the initial demand curve, are shown in the following table and alongside the graph input tool. 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 — Market for Triple Sevens’s Hotel Rooms
Price (Dollars per room)
Quantity Demanded (Hotel rooms per night)
300
200
Demand Factors
Average Income (Thousands of dollars)
Airfare from JFK to LAS (Dollars per round trip)
Room Rate at Exhilaration (Dollars per night)
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and that Triple Sevens is charging $300 per room per night.
If average household income increases by 25%, from $40,000 to $50,000 per year, the quantity of rooms demanded at the Triple Sevens from rooms per night to rooms per night. Therefore, the income elasticity of demand is _ , meaning that hotel rooms at the Triple Sevens are
If the price of a room at the Exhilaration were to decrease by 20%, from $250 to $200, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Triple Sevens from rooms per night to rooms per night. Because the cross-price elasticity of demand is – , hotel rooms at the Triple Sevens and hotel rooms at the Exhilaration are
Triple Sevens is debating decreasing the price of its rooms to $275 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 Triple Sevens is operating on the portion of its demand curve.