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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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
(Dollars per room)
(Hotel rooms per
PRICE (Dollars per room)
Average Income (Thousands af dollars)
Airfare from PIT to
(Dollars per roundtrip)
50 100 150 200 250 300 350 400 450 500
QUANTITY (Hotel rooms)
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
If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Oceans
rooms per night to
rooms per night. Therefore, the income elasticity of demand is
meaning that hotel rooms at the
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
rooms per night to
rooms per night. Because the
cross-price elasticity of
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
.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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