Elasticity :sample problem
A baseball team is trying to predict ticket sales for the upcoming season. They are also considering increasing prices.
"the elasticity of ticket sales with respect to the size of the population is estimated to about 0.7.
"briefly describe what this number means?
"If the local population increases from 60,000 to 61,500 what does this mean for ticket sales?
"currently the ticket price is $10. The price elasticity of demand for tickets is -0.60. Compute the
predicted change in tickets sold if the price were raised to $11. Also what is the expected change in total revenue?
"The typical fan also consumer $8 worth of refreshments at a game. Would raising ticket prices to $11 increase or decrease overall total revenue (ticket revenue and refreshment revenue)? How much would it go up or down?
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Solution provided by:
Albert Li, MSc