Answer to Question #94190 in Macroeconomics for Roc

Question

You are the curator of a butterfly sanctuary. The sanctuary is running low on funds, so you decide to increase revenue. What options should you consider? Should you raise or lower the price of admissions? Explain your reasoning in terms of demand and elasticity.

Answer 1

What options should you consider?

- Run a promotion targeting frequent visitors,for instance give discount for every accompanying visitor to the sanctuary.If one is accompanied by a friend to the sanctuary both are granted discount.The friend gets a higher discount for the first visit which reduces as the visits increase until he/she develops a habit of frequenting the sanctuary.

The price of admission should be raised because the demand for the sanctuary is driven by the passion for butterflies rather than price of admission fee.In other words it exhibits low price elasticity of demand.