If The Price Elasticity Of Demand

If the price elasticity of demand for tickets to a dance performance

of the Alvin Ailey American Dance Theatre is -1.2 for any quantity

of tickets sold, what would happen to the number of tickets sold if

the price were lowered from $100 to $90, if the quantity demanded at

$100 is 500 tickets? (HINT: Round your answer to the nearest whole

number.) Compute the total revenues for each of the two prices.

What is the (approximate) marginal revenue of the additional tickets

sold at the lower price? If Alvin Ailey is deciding between the two

ticket prices based on expected profits, which should they choose?

Repeat this exercise for a price elasticity of demand of -0.25. Does

the decision of Alvin Ailey change? Explain.