Question

The administrator of a county's museum is considering increasing the price of an annual pass by 1% from $55 to $55.55. At the current price, the museum sells 2000 annual passes and the point of elasticity is 0.62. What effect would the increase in price have on the museum's annual pass revenue?

Answer 1

The increase in price would  increase the annual pass revenue of the museum.

What is the effect of the increase in price on the annual pass revenue?

In order to determine the effect the increase in price would have on revenue, we have to examine the elasticity of demand of the museum pass.

The point elasticity is 0.62. This means that demand is inelastic. This means that when price increases, there would be little or no change in the quantity demanded. As a result, revenue would increase.

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