Final answer:
A baseball team or a band must consider the elasticity of demand to set ticket prices that maximize revenue. By finding the optimal balance between ticket price and total ticket sales in the presence of a downward-sloping demand curve, the highest profits can be achieved since the fixed costs remain the same regardless of attendance.
Step-by-step explanation:
When considering ticket prices and attendance, the main concept here is the elasticity of demand. The band, or in the original question, the baseball team, is seeking to find the optimal point where ticket pricing and attendance generate the maximum revenue.
For the baseball team example, with a linear relationship between price and attendance, we can determine the best ticket price by analyzing how changes in price affect the total number of tickets sold. When the price is $12, the average attendance is 29,000, and when the price drops to $10, attendance rises to 36,000.
To maximize revenue, the team could find the price that generates the highest product of price and number of attendees.
Similarly, with the band scenario, an understanding of the downward-sloping demand curve helps us answer the question: Does Raising Price Bring in More Revenue? With fixed costs, the goal is to maximize revenue.
This might mean finding a balance between a higher ticket price that brings in more per ticket but sells fewer tickets, versus a lower price that sells more tickets but at a lower price per ticket. The ideal ticket price is where revenue (price times quantity sold) is highest.