A minor league baseball team is trying to predict ticket sales for the upcoming season and is considering changing ticket prices.
a. The elasticity of ticket sales with respect to the size of the local population is estimated to be about .7. Briefly explain what this number means. If the local population increases from 60,000 to 61,500, what is the predicted change in ticket sales?
c. The typical fan also consumes $8 worth of refreshments at the game. Thus, at the original $10 average price, each admission generates $18 in total revenue for team management. Would raising ticket prices to $11 increase or reduce total revenue? Provide a careful explanation of your finding. (Hint: If you wish, you may assume a certain number of tickets sold per game, say 5,000. However, to answer the question the precise number of tickets need not be specified.)
