Answer P 107, Q 4 Elasticity of sales to population is 0.

7 A - If the local population increases from 60,000 to 61,500 what does this mean for ticket sales? Answer: elasticity e = % change in sales/ % change in population, 61 500 60 000 =1 500 60 000/1 500 =0.025 x= 0.7 x 0.025 = 0.0155 x 100 Thus ticket sales will increase by 1.55 % when population increased by 2.5 % from 60,000 to 61,500. B - Currently the ticket price is $10. New price is $11. The price elasticity of demand for tickets is -0.60. Change in tickets sold with new price? What is the expected change in total revenue? Answer: % change in price = (11 -10)/10 = 1/10 = 0.1 =10% e = % change in sales/ % change in price, or, -0.6 = x/ 0.1, or, x= - 0.6 x 0.1 = - 0. 06 Thus sales will fall by 6% if price increased by 10% from 10 to 11. Now Revenue = Sales quantity * price From this, we know %change in R = % change in Sales quantity + %change in price, or, % change in Revenue= -0.06 + 0.10 = 0.04 Thus revenue will increase by 4%

C - The typical fan also consumes $8 worth of refreshments at a game. Would raising ticket prices to $11 , increase or decrease overall total revenue (ticket revenue and refreshment revenue)? How much would it go up or down?

Answer: This question cannot be perfectly answered with the given information. But one say this.

Refreshments are complementary good to entertainment. If rise in ticket prices lead to a fall in ticket sales, sales of refreshment may also go down. If there is a f ixed budget, then, refreshment purchase may go down to $7 every time the person goes to the movie. But you may say that one may consume more of refreshments, now that the person goes less often to the movie plaza with the savings from fewer movie shows. Beyond the above, nothing can be said. We need information on cross elasticity of demand.