Question

If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock ______ from ______ rooms per night to ______ rooms per night. Therefore, the income elasticity of demand is _____, meaning that hotel rooms at the Peacock are _____.

Answer 1

Answer:

If average household income increases by 10%, from $50,000 to $55,000 per year, the quantity of rooms demanded at the Peacock rises, due to the fact that people have more to spend, from 300 rooms per night to  400 rooms per night. Therefore, the income elasticity of demand is positive, due to the fact that when income rises, demand also rises, meaning that hotel rooms at the Peacock are a normal good.

Explanation:

A good that experiences an increase in its demand due to a rise in consumers' income is referred to as a normal good . This implies that, if there's an increase in wages, demand for normal goods increases while conversely, wage declines lead to a reduction in demand.

Answer 2

Answer:

See attached picture.

Explanation:

See attached picture for explanation.