Question

The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers; die-hard fans and casual fans. For a particular WeR2Loud concert, there are 1000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. How much profit will the concert promoters earn if they set the price of each ticket at $150

Answer 1

The profit the concert promoters would earn if they set the price of each ticket to $150 is $100,000.

The willingness to pay of a consumer is the highest price a consumer would be willing to buy a good or service. The willingness to pay for a ticket of die-hard fans is $150 and the willingness to pay for casual fans is $50. When price of the concert is set to $150. Only die-hard fans would attend the concert.

Profit = total revenue - total cost

Total revenue = price per ticket x total ticket bought

$150 x 1000 = $150,000

Profit = $150,000 - $50,000 = $100,000

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