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A band selling concert tickets finds demand for tickets is elastic at its current price. According to the source, what should the band do to raise its total revenue?
ASell only to season subscribers
BCut the ticket price further
CRaise the ticket price instead
DKeep the price exactly the same
Answer & Solution
Correct answer: B. Cut the ticket price further
1. The band wants the pricing choice that raises total revenue, price times quantity sold.
2. When demand is elastic, quantity responds more than proportionally to a price change.
3. The source recommends cutting the price in this case, since the resulting percentage rise in quantity sold is larger than the percentage price cut.
4. Raising the price when demand is elastic would instead shrink revenue, the opposite of what the band wants.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.3 | Elasticity and Pricing_
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