9. 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 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.
Average American household income
$50,000 per year
Roundtrip airfare from Los Angeles (LAX) to Las Vegas (LAS)
Room rate at the Exhilaration Hotel and Casino, which is near the
$200 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.
: Once you enter a value in a white field, the graph and any corresponding amounts in each grey
field will change accordingly.
For each of the following scenarios, begin by assuming that all demand factors are set to their original
values and Triple Sevens is charging $350 per room per night.
If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of
rooms demanded at the Triple Sevens