Question

an economic estimate the elasticty of demand for baseball tickets to be 0.23 using this information a club that wants to raise revenue should

Answer 1

In the above case the firm should increase its price in order to raise its revenue.

Reason :-

When Ped <1, is inelastic, the firm can increase its revenue by rising its prices.

For example-

Intial quantity = 10

Intial price = 10

New quantity = 11.15 units

New price = 15

% change in quantity demanded = ((11.15-10)/10)*100

= 11.5%

% change in price =((15-10)/10*100)=50%

Ped = percentage change in quantity demanded divided by percentage change in price

= 11.5/50

=0.23

Intial revenue = 10*10=$100

New revenue = 11.15*15 = $ 167.25

Thus it is evident in the above case that the found will be able to raise its revenue when it increases its prices.