Answer to Question #65977 in Microeconomics for tommy

Question #65977
Suppose at a price of $50, Yoshi’s Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, answer the following using the ARC method: A) What is the price elasticity of demand for tickets to Yoshi’s Jazz Bar? B) What is the degree of elasticity for the tickets? C) What would happen to sales if Yoshi’s Jazz Bar lowered its ticket price by 2% to its sales (numeric answer)? D) What happens to the total revenue when they drop their price from $50 to $40?
Expert's answer
A)
Q0=50
P0=20
Q1=40
P1=25
ARC elasticity of demand = (∆Q/∆P)*(P1+P0)/(Q1+Q0)
ARC elasticity of demand = -10/5 *45/90 = -1
B) Unitary elastic demand
C) Sales will increase by 2%.
For P=25, Q=40: if ∆P= -0.5, than ∆Q=0.8
D) The total revenue won’t change
TR0=50*20=1000
TR1=40*25=1000
∆TR=0

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS
paypal