A minor league baseball team is in the process of determining its ticket pricgin

Question

A minor league baseball team is in the process of determining its ticket pricging policy. Past data suggests the following tickets sales elasticities: ticket price -0.6; refreshement price -0.2 and local population 0.7.
a) if the local population increases from 60,000 to 61,500, what will be the impact on ticket sales? What if refreshment prices rise 40% on average?
b) currently, an average fan pays an average ticket price of $5 and consumes $4 worth of refreshments at the game. Management is thinking of raising the average ticket price to $5.50. Compute the % in 1) tickets sold 2) ticket revenue 3) total revenue from admissions and refreshment sales.

Explanation / Answer

a. A 2.5% increase in population will result in a 0.7*2.5% = 1.75% increase in ticket sales. If refreshment sales go up by 40%, then ticket sales will drop by (-0.2)*40% = -8%. b. A 10% increase in ticket prices will cause ticket sales to drop by (-0.6)*10% = -6%. Revenue increases by approximately 10% - 6% = 4%. Refreshment sales drop by -2%, to $3.92 per person. Average revenue per person increase to $9.42, up by 4.67%; but attendance is down 6%, for a net decrease of -1.33% in total revenue.

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