At a concert five years ago, general admission tickets were priced at $30. Conce

Question

At a concert five years ago, general admission tickets were priced at $30. Concert promoters say that the price elasticity of demand for general admission concert tickets was -1.5 (ie EP = 1.5) Although this show was sold out, concert promoters estimate that they could have sold 30% more general admission tickets if spaced allowed. How much could the concert promoters have raised the price of a general admission ticket ( IN DOLLARS) and still maintained a sell out (assuming all the other demand factors are held constant)

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Explanation / Answer

Current capacity = C

D = C + 30%C = 1.3C

The formula for the coefficient of price elasticity of demand for a good is:[

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

Let final demand be C

-1.5 = ((C-1.3C)/1.3C)/(P-30)/30

P = $34.62

the concert promoters could have raised the price of a general admission ticket to $34.62

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