The Pittsburgh Steelers are considering increasing the price of the their jerseys the sell in the stadium from $130.00 to $165.00; however they found their sales decreased from 30,000 to 22,300 during one game. Should they increase their price, what is the Ed coefficient, is the demand elastic, inelastic, or unit elastic? What happened to the total revenue? Is this a good move or a bad move for the team?
Ans: They should not increase the price.
Ans: Ed = -1.23 or absolute value is 1.23
Explanation:
P1 = $130 , P2 = $165
Q1 = 30000 , Q2 = 22300
Ed =
= ( - 7700 / 35 ) * [ ( 130 + 165 ) / ( 30000 + 22300 )
= -220 * ( 295 / 52300 )
= -220 * 0.0056
= -1.23 or absolute value is 1.23
Ans: Demand is elastic
Explanation:
Here the demand is elastic because Ed coefficient is more than 1 .
Ans: Total revenue will decrease
Explanation:
Total revenue before change in price = $130 * 30000 = 3,900,000
Total revenue after change in price = $165 * 22300 = 3,679,500
Ans: This is a bad move for the team.
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