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tutorial_5 - elasticity of demand Will the stadium be full...

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ECOS 2001 Tutorial 5 1. The demand function for football tickets for a typical game at a large Midwestern university is D(p) = 200,000 – 10,000p. The university has a clever and avaricious athletic director who sets ticket prices so as to maximize revenue. The university’s football stadium holds 100,000 spectators. a. Write down the inverse demand function b. Write expression for total revenue and marginal revenue as a function of the number of tickets sold. c. Graph the demand function and the marginal revenue function. Show the capacity of the stadium on your diagram. d. What price will generate the maximum revenue? What quantity will be sold at this price? e. At this quantity what is the marginal revenue? At this quantity what is the price
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Unformatted text preview: elasticity of demand? Will the stadium be full? f. A series of winning seasons caused the demand curve for football tickets to shift upwards. The new demand curve is q(p) = 300,000 – 10,000p. Ignoring the capacity constraint what price would generate maximum revenue? What quantity would be sold at this price? g. Now considering the capacity constraint faced by the director, how many tickets should he sell and what is the price? i. If he does this, what are the MR and the price elasticity of demand? 2. Write revenue as a function of quantity sold, and derive the marginal revenue. Analyse the relationship between marginal revenue and the elasticity of demand....
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