Indicate for each of the following cases what will happen to the total admission (IT), that...

Indicate for each of the following cases what will happen to the total admission (IT), that is, if it increases (↑ IT), decreases (↓ IT) or remains constant.
1. Price decreases and demand is inelastic
2. Price increases and demand is elastic

Solutions

Expert Solution

Answer : 1) The answer is "increase".

For inelastic demand if price change then it does not impact the quantity demanded too much. For inelastic demand if price fall then the quantity demanded increase less than the changes in price level. As here the demand is inelastic and price level decreases hence the total admission will increase less than the changes in price level.

2) The answer is "decrease".

For elastic demand if price change then it impact the quantity demanded too much. For elastic demand if price rise then the quantity demanded decrease more than the changes in price level. As here the demand is elastic and price level increases hence the total admission will decrease more than the changes in price level.

Rahul Sunny answered 1 year ago

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