Question

Suppose the Tampa Bay Rays baseball team charges $10 for bleacher seats (low quality seats in the outfield) and sells 250,000 of them over the course of the season. The next season, the Rays increase the price to $12 and sell 200,000 tickets.

a. What is the price elasticity of demand for bleacher seats at Rays’ games?

b. Assuming the marginal cost of admitting one more fan is zero, is the price increase a good idea

Answer #1

Answer: (a) ε = %ΔQ/%Δp

= ((200,000 − 250,000)/250,000)/((12 − 10)/10) = −1.00. Demand is unit elastic since | ε | = 1.00. Alternatively, if a price increase of 20 percent leads to a 20 percent decline in ticket sales, the elasticity is −20/20 or −1.00.

(b) The price increase is not a good idea . Total revenues have fallen from $2,500,000 = (250,000)(10) to $2,400,000 = (200,000)(12). Anytime elasticity is greater than one, an increase in prices will result in a drop in total revenue.

3) In a given season, the Chicago Bears charge $50 for the
cheapest seats and 150,000 of these tickets sell. The Bears
increase the price to $75 the next season and sell 100,000
tickets.
(a) For the cheapest seats at Bears games, calculate the
elasticity of demand.
(b) Is the price increase a good idea (assume the marginal cost
of admitting one more fan is zero)

Suppose that a small market Major League Baseball team currently
charges $12 for a ticket. At this price, they are able to sell
12,000 tickets to each game. If they raise ticket prices to $15,
they would sell 11,052 tickets to each game.
a) Assuming the demand curve is linear, what is the algebraic
expression for demand?
b) What is the price elasticity of demand at $12?
c) What is the price elasticity of demand at $15?
d) Suppose that...

QUESTION 1
If a monopolist only charges one price, then we can conclude
that:
A. Consumer surplus is the same as under perfect competition
B. Consumer surplus is lower than under perfect competition
C. Consumer surplus is same under any market structure
D. Consumer surplus is higher than under perfect competition
QUESTION 2
Suppose you are considering buying the only major league
baseball team in a major US city. Currently, the team prices all
seats at a single monopoly price...

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