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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. PRICE (Dollars per room) 500 450 400 350 300 250 200 150 100 50 0 I Demand 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Hotel rooms) Graph Input Tool Market for Lakes’s Hotel Rooms Price (Dollars per room) Quantity Demanded (Hotel rooms per night) Demand Factors Average Income (Thousands of dollars) Airfare from PIT to ACY (Dollars per roundtrip) Room Rate at Mountaineer (Dollars per night) 400 100 40 100 200 For each of the following scenarios, begin by assuming that all demand factors are set to their original values and Lakes is charging $400 per room per night. If average household income increases by 50%, from $40,000 to $60,000 per year, the quantity of rooms demanded at the Lakes from rooms per night to rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Lakes are If the price of a room at the Mountaineer were to decrease by 20%, from $200 to $160, while all other demand factors remain at their initial values, the quantity of rooms demanded at the Lakes from rooms per night to rooms per night. Because the cross-price elasticity of demand is , hotel rooms at the Lakes and hotel rooms at the Mountaineer are Lakes is debating decreasing the price of its rooms to $375 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 Lakes is operating on the portion of its demand curve.