4. A minor league baseball team is trying to predict ticket sales for the upcomi

Question

4. A minor league baseball team is trying to predict ticket sales for the upcoming season and is considering changing ticket prices. a. The elasticity of ticket sales with respect to the size of the local population is estimated to be about .7. Briefly explain what this number means. If the local population increases from 60,000 to 61,500, what is the predicted change in ticket sales? b. Currently, a typical fan pays an average ticket price of $10. The price elasticity of demand for tickets is _.6. Management is thinking of raising the average ticket price to $11. Compute the predicted percentage change in tickets sold. Would you expect ticket revenue to rise or fall? c. The typical fan also consumes $8 worth of refreshments at the game. Thus, at the original $10 average price, each admission generates $18 in total revenue for team management. Would raising ticket prices to $11 increase or reduce total revenue? Provide a careful explanation of your finding. (Hint: If you wish, you may assume a certain number of tickets sold per game, say 5,000. However, to answer the question the precise number of tickets need not be specified.)

Explanation / Answer

the elasticity number means that : the change in the ticket sales per unit change of the local population estimeated change in ticket sales =10*(61500-6000) =15000 change in population =1500 given elasticity =0.6 predicted change in price = 0.6=(change in price/10)/(1500/60000) so change in price =0.15 hence the new price =10.15$ so new predicted sales =10.15*61500 =645750 $ if the price =11 0.6=(1/10)/(% change in tickets sold) =6% new revenue =11(60000-3600) =620400 old revenues were 600000 the manage ment revenues will increase by 20400 raising the ticket prices to 11 $ revenue from price increase =20400 total old revneu =60000*18 =1080000 new total revenue =1015200 so the price hike makes the no of people attending the match to decrease as the amount the management is getting is dominating 8$ /ticket as the management lost 3600 people who will eat the refreshments. and on an whole increase in price caused the revenue to fall by the amount of 64800$ cheers :)

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