The New York City Parks Department learned an important lesson about elasticity when it decided to increase the price of using city-owned tennis courts. Residents used to pay S100 for a seasonal permit, which allowed them to play on any city-owned court. City managers figured that if they raised the price to $200, they would sell nearly as many permits, while increasing their revenue. However, the price increase led the quantity of permits demanded to drop from 2,000 to 1,000. Calculate the change in revenue for the City of New York.

The New York City Parks Department learned an important lesson about elasticity when it decided to increase the price of using city-owned tennis courts. Residents used to pay S100 for a seasonal permit, which allowed them to play on any city-owned court. City managers figured that if they raised the price to $200, they would sell nearly as many permits, while increasing their revenue. However, the price increase led the quantity of permits demanded to drop from 2,000 to 1,000. Calculate the change in revenue for the City of New York.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter6: Simple Pricing

Section: Chapter Questions

Problem 1MC

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