The director of a recreation center in a small college town is considering changing the way he prices access cards. He has hired an economic consulting firm to estimate the demand for access cards. The im has classified people who go the recreation center into two groups, and has come up with two demand functions. The demand curves for the general public (Q„) and students (Q,) are given below: Q = 700 – 4P Q, = 1,300 – 5P a. If the current price of access cards is $100, identify the quantity demanded by each group. b. Find the price elasticity of demand for each group at the current price and quantity. c. Is the director maximizing the revenue he collects from card sales by charging $100 for each card? Explain.

The director of a recreation center in a small college town is considering changing the way he prices access cards. He has hired an economic consulting firm to estimate the demand for access cards. The im has classified people who go the recreation center into two groups, and has come up with two demand functions. The demand curves for the general public (Q„) and students (Q,) are given below: Q = 700 – 4P Q, = 1,300 – 5P a. If the current price of access cards is $100, identify the quantity demanded by each group. b. Find the price elasticity of demand for each group at the current price and quantity. c. Is the director maximizing the revenue he collects from card sales by charging $100 for each card? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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