You are organizing a rock concert to benefit Amnesty International. The concert is to be held in a football stadium that has a seating capacity of 56,000. There are two types of seating: reserved and general. Demands for these seats are estimated as:
PR = 100-.00125 QR and PG = 60-.00125 QG
Where PR and PG denote ticket prices for reserved and general seating and QR and QG are the number of those seats.
All artists and support staff are donating their time, but there is a fixed cost of $100, 000.
(a) Using the method of the Lagrange multiplier calculate the prices that you will charge to so that the profit is maximized and at the same time the stadium will be filled to capacity. Calculate the number of each type of tickets sold, as well as the consequent profit level.
(b) Calculate the value of the Lagrange multiplier. Explain its economic significance in this case.
Using Excel- Solver verify your answers to (a) above. (Show your work. Show the spreadsheets in detail. Show the Solver window embedded on the relevant worksheet so that the commands in the Solver window become directly visible and are linked to the cells of the worksheet. To show the solver window, use print screen command on your key board and then create a MS Word document using paste.)