Managerial Economics 510.. Problem Set 1

Jul 14th, 2016
Studypool Tutor
Sullivan University
Price: $20 USD

Tutor description

12. Modifying a product to increase its “value added” benefits customers and can also enhance supplier profits. For example, suppose an improved version of a product increases customer value added by $25 per unit. (In effect, the demand curve undergoes a parallel upward shift of $25.) 6. A minor league baseball team is trying to predict ticket sales for the upcoming season and is considering changing ticket prices. a. The elasticity of ticket sales with respect to the size of the local population is estimated to be about 0.7. Briefly explain what this number means. If the local population increases from 60,000 to 61,500, what is the predicted change in ticket sales? b. Currently, a typical fan pays an average ticket price of $10. The price elasticity of demand for tickets is 0 .6. Management is thinking of raising the average ticket price to $11. Compute the predicted percentage change in tickets sold. Would you expect ticket revenue to rise or fall?

Word Count: 680
Showing Page: 1/3
12.a. If the redesign is expected to increase the items marginal cost by $30,should the company undertake it?25-30= -5By increasing the marginal cost by $30 there will be a negative loss of $5 per unit because thecustomer value added is $25 per unit. So the company should not undertake the redesign.b. Suppose instead that the redesign increases marginal cost by $15.Should the firm undertake it, and (if so) how should it vary itsoriginal output and price?25-15= 10By increasing the marginal cost by $15 there is a positive of $10 per unit. So the company shouldundertake this redesign. The output will increase and the price will increase by $15.6. A minor-league baseball team is trying to predict ticket sales for the upcoming seasonand is considering changing ticket prices.a. The elasticity of ticket sales with respect to the size of the local population is estimated to

Review from student

Studypool Student
" Excellent work as always thanks so much "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1828 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors