Stillwater Creek Parakeets, a minor league baseball team, has hired you as a consultant to predict ticket sales for the upcoming season, and to advise on changes in ticket prices.
a. The elasticity of ticket sales with respect to the local population is estimated to be 0.9. If the local population increases from 130,000 to 140,000, what is the predicted change in ticket sales?
b. The current price is $7.50. If price elasticity of demand is -0.85, predict the percentage change in tickets if price is raised to $8.50. Will revenue rise or fall? How does your answer change if price elasticity is -1.1?
c. You have estimated income elasticity to be 0.75. Explain what this means and why it is important for management.