4. The Spokane Indians, a minor league baseball team affiliated with the Texas Rangers, are trying to predict sales for the upcoming season and are considering changing ticket prices.(10)
a. The elasticity of ticket sales with respect to the size of the Spokane population is estimated to be 0.7. Please briefly explain what this value of 0.7 means. If the population of Spokane increases from 210,000 to 212,500, what is the predicted sales increase?
b. Last season, the typical fan paid an average of $10 per ticket. The price elasticity of demand is -0.6. Management is considering raising the average price of tickets to $11. Compute the predicted percentage change in tickets sold. Would you expect ticket revenue to rise or fall?
c. The typical fan also consumes $8 worth of food and beverages at a game. Thus, at the original $10 average ticket price, each admission generates $18 in total revenue for management. Would raising ticket prices to $11 increase or reduce total revenue? Please provide enough detail to demonstrate your understanding. (Hint: if you want, you can assume a certain number of tickets sold per game, say 5,000. However, the precise number of tickets need not be specified to answer the question.).
4. The Spokane Indians, a minor league baseball team affiliated with the Texas Rangers, are trying to predict sales for the upcoming season and are considering changing ticket prices.(10)
a. The elasticity of ticket sales with respect to the size of the Spokane population is estimated to be 0.7. Please briefly explain what this value of 0.7 means. If the population of Spokane increases from 210,000 to 212,500, what is the predicted sales increase?
b. Last season, the typical fan paid an average of $10 per ticket. The price elasticity of demand is -0.6. Management is considering raising the average price of tickets to $11. Compute the predicted percentage change in tickets sold. Would you expect ticket revenue to rise or fall?
c. The typical fan also consumes $8 worth of food and beverages at a game. Thus, at the original $10 average ticket price, each admission generates $18 in total revenue for management. Would raising ticket prices to $11 increase or reduce total revenue? Please provide enough detail to demonstrate your understanding. (Hint: if you want, you can assume a certain number of tickets sold per game, say 5,000. However, the precise number of tickets need not be specified to answer the question.).
