Question

L . Question 2 (15 marks) The student union of University X usually allows members to purchase tickets for its annual con- cert, but it is considering non-members to purchase tickets this year. The demand and supply + schedules are as follows: Quantity Demanded by Quantity Demanded by Price Quantity Supplied Members Non-members $100 600 350 650 $150 500 300 650 400 250 650 $200 $250 $300 300 200 650 2002 150 650 . a. If both members and non-members can purchase tickets for this year's annual concert, what will be the equilibrium price and quantity? (2 marks) Answer: . b. Using mid-point approach, calculate the price elasticity of demand for concert tickets between the price range of $200 and $250. Would you recommend the student union to reduce the number of seats to increase total revenue? Explain your answer using the concept of elasticity. (8 marks) Answer: .C. Suppose the management of University X thinks that the equilibrium price is too low for supporting the services of student union and decides to impose a $250 price floor to the concert. How would it affect the price and quantity of tickets? Is there a shortage or surplus of tickets? What is the exact amount? (5 marks) Answer:

Answer 1

b. Student union should not reduce the number of seats to increase TR. A decrease in the number of seats will mean the price to rise. As the calculated elasticity is Unitary, and given the relationship between price and TR( in the attached picture), a rise in price will mean a fall in TR. So it is not advisable to decrease the number of seats.

CIASSMATE Date Page bruce Po C Members) (Non-members] Goo 350 300 100 150 1200 1250 300 soo & 400 und 650 650 650-E 2500 200 150 3oooh 200 650 G 650 650 (a) aquilibrium will be where Total Od C Members + Non-members will be equal to quantity supplied At P = $200, go to 1400 + 250 Ib. Percentage a in quantity - 92-91 (92+01+2 Percentage. A su price : P2- Pi (P2+hi) + 2 Mid pourt formula Xtoo Xloo

Date Page 1 TRA Ed of a in quantity of oui price Door Total Qo 200-li 400 250 con 650 to Q50-2 300 200 vol soo OO o in po 500-650 X100 (500+689) NTC Percentage NJ - 150 X 100 in 1150/2 Percentage a eupa 150 100 575 Oh sa 26.086 250-200 (250+ 200/2 X200 wa so WA x 100 4592 in so IV

classmate Date Page Ed = - 26.086 - 1.17 22,22 C More than unitary C c Elastic) Elasticity and Total Revenue 1 Inelastic P prise TR P Rise 2 Elastic l to fall TR ↑ Rise P- same TR- same Inelastic change change (Surplus, Due to Price floor $250) $250 price will rise 200 E - go will fall - Surplus of 150 3. Peafectly price floor Price ol Quantity