Multiple answers may be correct: ### Understanding Demand Elasticity and Revenue#### Question:If building the smaller stadium increases profits and total revenue, is the demand for seats more likely to be D1 rather than D2 because the demand on D1 is more elastic than the demand on D2? #### Options:1. **Option A:** - If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D1 rather than D2 because the demand on D1 is more elastic than the demand on D2. 2. **Option B:** - If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D1 rather than D2 because the demand on D1 is more inelastic than the demand on D2. 3. **Option C:** - None of the above. 4. **Option D:** - If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D2 rather than D1 because the demand on D1 is more elastic than the demand on D2. 5. **Option E:** - If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D2 rather than D1 because the demand on D1 is more inelastic than the demand on D2.### Explanation:Understanding whether demand is elastic or inelastic is crucial in this scenario:- **Elastic Demand:** A situation where the quantity demanded of a good or service changes significantly due to a change in its price.- **Inelastic Demand:** A situation where the quantity demanded of a good or service changes little when its price changes.In the context of stadium seats:- If the demand is elastic (D1), price changes significantly affect the number of seats sold.- If the demand is inelastic (D2), price changes do not significantly affect the number of seats sold.When total revenue increases after building a smaller stadium (which presumably has higher-priced tickets due to limited availability), it indicates that the demand for seats might be inelastic (people will pay higher prices despite higher costs). Therefore, the correct reasoning should align with this concept. **Analyzing Demand Curves for Stadium Seats**In this illustration, we consider two separate demand curves for stadium seats, labeled as D1 and D2. The graph provided shows these demand curves on a standard price-quantity plane, with the price represented on the vertical axis and quantity on the horizontal axis.**Description of the Graph:**- **Axes:** - The vertical axis represents the "Price" of stadium seats. - The horizontal axis represents the "Quantity" of stadium seats demanded.- **Demand Curves:** - **D1**: This demand curve is positioned to the right and is less steep compared to D2. It indicates that as the price decreases, the quantity demanded increases significantly. - **D2**: This demand curve is positioned to the left and is steeper compared to D1. It suggests that a decrease in price results in a less significant increase in the quantity demanded.**Interpretation:**1. **D1 Demand Curve:** This curve can represent a scenario where consumer preference or market conditions make stadium seats more attractive, meaning a slight reduction in price significantly boosts the quantity demanded. This could occur in instances of high demand due to the popularity of an event or venue improvements.2. **D2 Demand Curve:** On the other hand, the D2 curve may represent a scenario of lower overall market demand where even substantial price reductions result in relatively small increases in the quantity demanded. This could be due to factors such as lower interest in events, unfavorable economic conditions, or competition from other entertainment options.In summary, analyzing these demand curves helps in understanding how varying conditions affect consumers' willingness to purchase stadium seats at different price points. The comparative analysis of D1 and D2 provides insights into market behavior and aids in strategic pricing decisions.

Price elasticity of demand refers to the responsiveness of quantity demanded to a change in the…

O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D1 rather than D2 because the demand on D1 is more elastic than the demand on D2. O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D1 rather than D2 because the demand on D1 is more inelastic than the demand on D2. O none of the above O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D2 rather than D1 because the demand on D1 is more elastic than the demand on D2. O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D2 rather than D1 because the demand on D1 is more inelastic than the demand on D2.

O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D1 rather than D2 because the demand on D1 is more elastic than the demand on D2. O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D1 rather than D2 because the demand on D1 is more inelastic than the demand on D2. O none of the above O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D2 rather than D1 because the demand on D1 is more elastic than the demand on D2. O If building the smaller stadium increases profits and total revenue, the demand for seats is more likely to be D2 rather than D1 because the demand on D1 is more inelastic than the demand on D2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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