Final answer:
To find the ticket price that maximizes revenue for a baseball team, one must understand and calculate the effects of price elasticity of demand, balancing the extra attendees against the reduced price until additional revenue from increased attendance no longer offsets the lost revenue from the lower ticket price.
Step-by-step explanation:
To determine the ticket price that would maximize revenue for a baseball team, we need to apply the concept of price elasticity of demand. The team has observed that a $1 reduction in ticket price results in an increase of 2,000 in attendance. We use the equation for revenue: R = P × Q (Revenue equals Price times Quantity). As price falls from $10 to $9, revenue increases from $240,000 to $234,000, suggesting that the lower price has not maximized revenue yet.
To find the price that maximizes revenue, we need to identify the point at which further reductions in price no longer lead to increases in revenue. This involves finding the price elasticity of demand. If we continue to lower the price and attendance increases by 2,000 for each dollar reduction, we need to calculate the additional revenue from the extra attendees against the lost revenue from the lower price.
With each $1 decrease yielding 2,000 more attendees, we can set up an equation — to solve for the maximum revenue, we continue to decrease the price and increase attendance until the additional revenue from extra tickets sold is less than the revenue lost due to the price drop.