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Suppose the Madison Mallard’s ball club is suffering from low revenues and profits. If the company wants to increase ticket revenue and the price elasticity of demand is 1.75, the company should: a. Increase the price of tickets. b. Decrease the price of tickets. c. Keep the price unchanged because if the price is either increased or decreased total revenues will fall. d. Advertise. The only option the company has to raise total revenues is to advertise.

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Respuesta :

Answer:

The correct answer is option b.

Explanation:

The price elasticity of demand is 1.75.

Madison Mallard’s ball club is suffering from low revenues and profits.  

The company wants to increase ticket revenue

The price elasticity of demand is greater than 1 which implies that demand relatively prices elastic.  

Elastic demand means that a change in price will cause the quantity demanded to change to a greater extent. So if the company wants to increase revenue it should decrease the price.  

A decline in price will cause the quantity demanded to increase to a greater extent. This will cause total revenue to increase.

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