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Demand For Hotel Rooms At The Oceans Assignment Paper
The following graph input tool shows the daily demand for hotel rooms at the Oceans 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 For Hotel Rooms At The Oceans Assignment Paper

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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 Meadows Hotel and Casino, which is near the Oceans
$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 field will change accordingly Demand For Hotel Rooms At The Oceans Assignment Paper.
Graph Input Tool
Market for Oceans's Hotel Rooms
500
450
300
Price
(Dollars per room)
400
200
360 300
Quantity Demanded
(Hotel rooms per
night)
PRICE (Dollars per room)
Demand Factors
200 150
Demand
50
Average Income (Thousands af dollars)
100
Airfare from PIT to
ACY
(Dollars per roundtrip)
a
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
250
Room Rate at
Meadows (Dollars per night)
For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $300 per room
per night.
If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Oceans
from
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
meaning that hotel rooms at the
Oceans are
If the price of a room at the Meadows were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values, the
quantity of rooms demanded at the Oceans
from
rooms per night to
rooms per night. Because the
cross-price elasticity of
demand is
hotel rooms at the Oceans and hotel rooms at the Meadows are
Oceans 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 Oceans is operating on the
portion of its
demand curve Demand For Hotel Rooms At The Oceans Assignment Paper.

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Step-by-step
Step 1/1

If average household income increases by 10% from $50,000 to $55,000 per year, the quantity of rooms demanded at the Oceans would increase from 250 rooms per night to 300 rooms per night. Therefore, the income elasticity of demand is 1.5, meaning that hotel rooms at the Oceans are income elastic.
If the price of a room at the Meadows were to decrease by 10% from $250 to $225 while all other demand factors remain at their initial values, the quantity of rooms demanded at the Oceans would increase from 250 rooms per night to 300 rooms per night. Because the cross-price elasticity of demand is 0.5, hotel rooms at the Oceans and hotel rooms at the Meadows are complements.
Oceans 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 increase. Decreasing the price will always have this effect on revenue when Oceans is operating on the elastic portion of its demand curve Demand For Hotel Rooms At The Oceans Assignment Paper

Expert Answer

Demand For Hotel Rooms At The Oceans Assignment Paper

The following graph input tool shows the daily demand for hotel rooms at the Oceans 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 For Hotel Rooms At The Oceans Assignment Paper

ORDER YOUR PAPER NOW

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 Meadows Hotel and Casino, which is near the Oceans

$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 field will change accordingly Demand For Hotel Rooms At The Oceans Assignment Paper.

Graph Input Tool

Market for Oceans's Hotel Rooms

500

450

300

Price

(Dollars per room)

400

200

360 300

Quantity Demanded

(Hotel rooms per

night)

PRICE (Dollars per room)

Demand Factors

200 150

Demand

Average Income (Thousands af dollars)

100

Airfare from PIT to

ACY

(Dollars per roundtrip)

50 100 150 200 250 300 350 400 450 500

QUANTITY (Hotel rooms)

250

Room Rate at

Meadows (Dollars per night)

For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Oceans is charging $300 per room

per night.

If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Oceans

from

rooms per night to

rooms per night. Therefore, the income elasticity of demand is

meaning that hotel rooms at the

Oceans are

If the price of a room at the Meadows were to decrease by 10%, from $250 to $225, while all other demand factors remain at their initial values, the

quantity of rooms demanded at the Oceans

from

rooms per night to

rooms per night. Because the

cross-price elasticity of

demand is

hotel rooms at the Oceans and hotel rooms at the Meadows are

Oceans 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 Oceans is operating on the

portion of its

demand curve Demand For Hotel Rooms At The Oceans Assignment Paper.

ORDER YOUR PAPER NOW

Step-by-step

Step 1/1

If average household income increases by 10% from $50,000 to $55,000 per year, the quantity of rooms demanded at the Oceans would increase from 250 rooms per night to 300 rooms per night. Therefore, the income elasticity of demand is 1.5, meaning that hotel rooms at the Oceans are income elastic.

If the price of a room at the Meadows were to decrease by 10% from $250 to $225 while all other demand factors remain at their initial values, the quantity of rooms demanded at the Oceans would increase from 250 rooms per night to 300 rooms per night. Because the cross-price elasticity of demand is 0.5, hotel rooms at the Oceans and hotel rooms at the Meadows are complements.

Oceans 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 increase. Decreasing the price will always have this effect on revenue when Oceans is operating on the elastic portion of its demand curve Demand For Hotel Rooms At The Oceans Assignment Paper

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