In: Economics
you are the curator of a museum. the museum is running short of funds, so you decided to increase revenue. should you increase or decrease the price of admission? explain
It depends on the elasticity of demand for the museum visits. In economics, there is a strong relation between total revenue and elasticity of demand.
Total revenue is the amount received by the firm by selling goods. (Price*Quantity)
Elasticity of demand is the degree of responsiveness to change in quantity demand due to change in the price of good (%change in quantity demanded / % change in price)
The relation between total revenue and elasticity of demand is:
Therefore, the museum can decide whether to increase or decrease the price depending upon its elasticity of demand.