MICROECONOMICS CLASS(this is a different question with different numbers,there i
ID: 1094942 • Letter: M
Question
MICROECONOMICS CLASS(this is a different question with different numbers,there is another question with different numbers here the link http://www.chegg.com/homework-help/questions-and-answers/microeconomics-class-san-francisco-giants-want-boost-revenues-ticket-sales-next-season-hir-q6045861#)
(please come up with different answer and examples)
The San Francisco Giants want to boost revenues from ticket sales next season. You are hired as an economic consultantand asked to advise the Giants whether to raise or lower ticket prices next year. If the elasticity of demand for Giants game tickets is estimated to be 1.6, what would you advise? What would be your advice if the elasticity of demand equals 0.4? Give your reasoning. Please give examples and use Economic terms.
Explanation / Answer
Firm is obsessed with increase in its revenue. But increase in the total revenue depends on the elasticity of demand in market.
When Elasticity of demand is 1.6
1.6 elasticity of demand says that demand is elastic and 1 % increase in the price would lead to 1.6 % decrease in the demand. Hence, there would be fall in the total revenue of firms. Hence, Firm should not increase price here.
When Elasticity of demand is 0.5
0.5 elasticity of demand implies that 1 % increase in the price would lead to 0.4 % decrease in the demand. Thus, Company or firm can increase total revenue by increasing price here.
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