Question

Assume everyone has been vaccinated against COVID-19. If the owner of the Dallas Cowboys acquires all the parking space within a mile of Cowboys Stadium, to maximize his profits he should:

raise prices for game tickets, but lower prices for game parking.

raise prices for both game tickets & parking.

lower prices for both game tickets & parking.

lower prices for game tickets, but raise prices for game parking.

Answer 1

Solution:

The demand for games is highly elastic, as it can be in a way considered more of a luxury good. By lowering the prices of game, it will attract a huge audience. Further, if someone plans to watch a game, they'll prefer to park near around the stadium itself. So, in that way, demand for parking becomes slightly inelastic, and even if slight higher prices are set for it, the audience visiting stadium to watch the low priced game won't be bothered much with higher game parking.

Thus, in order to maximize profits, best way would be to lower the game price and higher game parking price (not too high as to make part audience feeling to repelent towards parking price, that they give up on game as well), making (D) the correct option.