Final answer:
The variables in this situation are the price of the tickets and the quantity of tickets sold. The relationship between price, quantity, and revenue can be analyzed using the concept of price elasticity of demand. Diana should lower the price if demand is elastic, raise the price if demand is inelastic, and can maintain the same revenue if demand has unitary elasticity.
Step-by-step explanation:
The variables in this situation are the price of the tickets and the quantity of tickets sold. These two variables directly affect the total revenue generated by Diana from ticket sales. The relationship between price, quantity, and revenue can be analyzed using the concept of price elasticity of demand.
If demand for tickets is elastic, Diana should lower the price to increase total revenue. A decrease in price will result in a larger percentage increase in the quantity sold, leading to a higher total revenue. On the other hand, if demand is inelastic, Diana should raise the price to increase revenue. A certain percentage increase in price will result in a smaller percentage decrease in quantity sold, ultimately raising total revenue.
If demand has unitary elasticity, an equal percentage change in quantity will offset a moderate percentage change in price. In this case, Diana can earn the same revenue regardless of a moderate increase or decrease in ticket price.