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6 November, 23:31

A Broadway play company can only charge one price for tickets to a given performance of its play. The company manager notices that they earn greater total revenue when they charge a higher ticket price and its theater is three-quarters full than when they charge a lower ticket price and the theater is completely full. It follows that demand for this play is:a. perfectly elasticb. inelasticc. unit elasticd. elastic

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  1. 6 November, 23:40
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    b) inelastic

    Explanation:

    Elasticity of demand measures the degree of responsiveness of quantity demand to a change in price. This index indicates what the percentage change in quantity demand would be with a given % change in price.

    Elastic demand

    A product is said to be price elastic if a change in price produces more than a proportional change in quantity. In such case, a reduction in price will increase revenue ... It is a good pricing policy to reduce price if the demand for a product is established to be price elastic.

    Inelastic demand

    An inelastic demand implies that a given change in price will produce less than proportional change in quantity demand. So here, revenue will increase more only with an increase in price. This is so beca]use, cunsumers demand will react less to a given change in price. So the appropriate pricing policy is to increase price if the demand for a product is known to be price inelastic.

    From the explanation above, it can be established that the demand for play performance ticket is price inelastic
  2. 6 November, 23:44
    0
    Inelastic.

    Explanation:

    Elasticity of demand for a particular product is a measure of responsiveness of quantity demanded to changes in price of the product. Generally when price increases there is a decrease in the quantity demanded of a product.

    When demand is elastic it gives normal results.

    However when demand is inelastic an increase in price will not lead to a proportional decrease in demand.

    The Broadway play company can increase prices and notice a low reduction in quantity demanded (that is from a full theatre to a three quarter theatre).

    This indicates that the reduction in quantity demand is small relative to price as they make more profit by raising price.
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