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Suppose the MGM Grand is currently charging $150 per night to stay at the hotel; average household income is $50,000 (its initial value); and the Luxor charges $150 per night (its initial value). If the price of an airline ticket from LAX to LAS were to increase by approximately 10%, from $100 to $110 round-trip, the quantity of rooms demanded would decrease from 300 to 280 per night, a decrease of 7%; therefore, the cross elasticity of demand between these two goods is -0.7. From the fact that the cross elasticity of demand is _____, we may conclude that hotel rooms at the MGM Grand and airline trips between LAX and LAS are ______.
    A.  Negative; complementary goods
    B.  Less than 1; substitute goods
    C.  Negative; substitute goods
    D.  Less than 1; complementary goods

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91709467

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