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Page 2 3. In a study ("Price elasticity in the performing arts" by Kolhede, Gomez-Arias & Maximova 2023) researchers surveyed residents in one California county. They used responses to 28 questions about motivations to attend events to develop motivation factors and then clustered respondents into 3 segments based on their motivations. The authors estimated the performing arts event demand for each segment and calculated the demand elasticities at different prices and reported the following: Elasticities for the 3 segments with a $20 Admission Price were 0.317, 0.343, and 0.317 Elasticities for the 3 segments with a $60 Admission Price were 2.608, 3.269, and 2.590 Unitary Elasticity was at $41.50, $39.18, and $41.58 for the 3 segments Assume that the cost of event production is fixed (not related to attendance). As an economics expert, you are asked to help the performing arts group set ticket prices for next season. a. One committee of the performing arts group wanted to maximize community exposure. They considered a $20 admission price, but concluded they will lose money. Would you recommend they raise or lower the price from $20 to increase profits? Explain b. Another committee wanted to make sure they generate a profit and start with the $60 price. However, they also concluded they will lose money. Would you recommend they raise or lower the price from $60 to increase profits? Explain c. After some thought, the group realized they can maximize profits by maximizing their revenue. What general admission ticket price would you recommend they use? Explain

Page 2 3. In a study ("Price elasticity in the performing arts" by Kolhede, Gomez-Arias & Maximova 2023) researchers surveyed residents in one California county. They used responses to 28 questions about motivations to attend events to develop motivation factors and then clustered respondents into 3 segments based on their motivations. The authors estimated the performing arts event demand for each segment and calculated the demand elasticities at different prices and reported the following: Elasticities for the 3 segments with a $20 Admission Price were 0.317, 0.343, and 0.317 Elasticities for the 3 segments with a $60 Admission Price were 2.608, 3.269, and 2.590 Unitary Elasticity was at $41.50, $39.18, and $41.58 for the 3 segments Assume that the cost of event production is fixed (not related to attendance). As an economics expert, you are asked to help the performing arts group set ticket prices for next season. a. One committee of the performing arts group wanted to maximize community exposure. They considered a $20 admission price, but concluded they will lose money. Would you recommend they raise or lower the price from $20 to increase profits? Explain b. Another committee wanted to make sure they generate a profit and start with the $60 price. However, they also concluded they will lose money. Would you recommend they raise or lower the price from $60 to increase profits? Explain c. After some thought, the group realized they can maximize profits by maximizing their revenue. What general admission ticket price would you recommend they use? Explain

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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Page 2 3. In a study ("Price elasticity in the performing arts" by Kolhede, Gomez-Arias & Maximova 2023) researchers surveyed residents in one California county. They used responses to 28 questions about motivations to attend events to develop motivation factors and then clustered respondents into 3 segments based on their motivations. The authors estimated the performing arts event demand for each segment and calculated the demand elasticities at different prices and reported the following: Elasticities for the 3 segments with a $20 Admission Price were 0.317, 0.343, and 0.317 Elasticities for the 3 segments with a $60 Admission Price were 2.608, 3.269, and 2.590 Unitary Elasticity was at $41.50, $39.18, and $41.58 for the 3 segments Assume that the cost of event production is fixed (not related to attendance). As an economics expert, you are asked to help the performing arts group set ticket prices for next season. a. One committee of the performing arts group wanted to maximize community exposure. They considered a $20 admission price, but concluded they will lose money. Would you recommend they raise or lower the price from $20 to increase profits? Explain b. Another committee wanted to make sure they generate a profit and start with the $60 price. However, they also concluded they will lose money. Would you recommend they raise or lower the price from $60 to increase profits? Explain c. After some thought, the group realized they can maximize profits by maximizing their revenue. What general admission ticket price would you recommend they use? Explain
Transcribed Image Text:Page 2 3. In a study ("Price elasticity in the performing arts" by Kolhede, Gomez-Arias & Maximova 2023) researchers surveyed residents in one California county. They used responses to 28 questions about motivations to attend events to develop motivation factors and then clustered respondents into 3 segments based on their motivations. The authors estimated the performing arts event demand for each segment and calculated the demand elasticities at different prices and reported the following: Elasticities for the 3 segments with a $20 Admission Price were 0.317, 0.343, and 0.317 Elasticities for the 3 segments with a $60 Admission Price were 2.608, 3.269, and 2.590 Unitary Elasticity was at $41.50, $39.18, and $41.58 for the 3 segments Assume that the cost of event production is fixed (not related to attendance). As an economics expert, you are asked to help the performing arts group set ticket prices for next season. a. One committee of the performing arts group wanted to maximize community exposure. They considered a $20 admission price, but concluded they will lose money. Would you recommend they raise or lower the price from $20 to increase profits? Explain b. Another committee wanted to make sure they generate a profit and start with the $60 price. However, they also concluded they will lose money. Would you recommend they raise or lower the price from $60 to increase profits? Explain c. After some thought, the group realized they can maximize profits by maximizing their revenue. What general admission ticket price would you recommend they use? Explain
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