Wednesday, October 13, 2004

Increase or decrease the ticket price of the Museum?

I went to American Museum of Natural History during the Four Day Break, the price of which was about $200. If we would like to increase the revenue by changing the ticket price, what will we do? Increase or decrease the ticket price?
The answer depends on the elasticity. If the elasticity is smaller than 1, demand is considered inelastic so that increasing the ticket price will make the revenue rise. However, if the elasticity is greater than 1, demand is considered elastic so that revenue will go down in response to a price increase. In that case, we should reduce the ticket price to make more people come to the Museum and raise the revenue.
To get the elasticity, we need to ask experts on statistics because they have a lot of information about what happened in the past few years when the ticket price changed. Also, we should notice other factors, which may have effect on the number of people who would like to go to the Museum. For instance, the weather. Bad weather may keep some people home instead of paying for the ticket and go to the Museum so the number of people will decrease. We can get a presumption about the elasticity and then make a decision how to change the price to increase the revenue of the Museum.

No comments: