4. You are the manager of the National Museum and the Government has cut its fun

Question

4. You are the manager of the National Museum and the Government has cut its funding. As a result, you must increase revenues from ticket sales. You currently charge $3 per ticket for everyone who comes to the museum. Given the demand curves shown, answer the following questions: Local Residents Price S10 $10 58 58 35 54 $4 53 2t-++ DLA $1 $1 25 4 45 50 20 33 45 55 a. What is your current total revenue for both groups? b. The elasticity of demand is more elastic in which market? c. What is the elasticity of demand between the prices of $5 and $2 in the tourist market? this elastic or inelastic? d. What is the elasticity of demand between $5 and $7 in the local residents' market? Is this elastic or inelastic? A Given the graphs and what you know about economic s, you have two options: 1)

Explanation / Answer

(a) At current market rate of $3, the total demand by local resident is 50 tickets and by tourist is 45.

Total reveneu = $3x(50+45) = $285.

(b) Elasticty is seen by the slope of the demand curve. The flatter the demand curve the more elastic the demand is and vice versa. Therefore local residents have an elastic demnd and tourists have inelastic demand.

(c) In tourist market elasticity between $5 and $2 is:

elasticity = % change in demand / % change in price

elasticity = (55-33) /33 / (2-5)/5

elasticity = -1.111

The demand is elastic since it is greater than 1.

(d) In resident market the demand for tickets at $5 is 45 and at $7 is 25.

elasticity = (45-25)/25 / (5-7)/7

elasticity = -2.8

The demand is elastic, greater than tourist.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.