Question

the mohan began footbal team plays in a stadium with a seating capacity of 180000. however during the past season, attendance averaged only 150000. the average ticket price was rs 30 if price elasticity is -4, what price should team have to charge in order to fill the stadium?

Answer 1

Answer on Question #44617 – Economics - Economics of Enterprise

The mohan began footbal team plays in a stadium with a seating capacity of 180000. however during the past season, attendance averaged only 150000. the average ticket price was rs 30 if price elasticity is -4, what price should team have to charge in order to fill the stadium?

Solution

Price elasticity (Ed):

$$E _ {d} = \frac {\frac {P _ {1} + P _ {2}}{2}}{\frac {Q _ {d _ {1}} + Q _ {d _ {2}}}{2}} \times \frac {\Delta Q _ {d}}{\Delta P} = \frac {P _ {1} + P _ {2}}{Q _ {d _ {1}} + Q _ {d _ {2}}} \times \frac {\Delta Q _ {d}}{\Delta P}$$

P means a price, Q means the quantity.

In our case:

$$\begin{array}{l} -4 = (30 + P2) / (150000 + 180000) * (180000 - 150000) / (P2 - 30) \\ -4 = (30 + P2) / 330000 * 30000 / (P2 - 30) \\ -4 = (30 + P2) / (11(P2 - 30)) \\ -44P2 + 1320 = 30 + P2 \\ 45P2 = 1290 \\ P2 = rs\ 28.7 \\ \end{array}$$

So, the new price should be rs 28.7, which is lower, than the previous price.

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