Final answer:
Increasing sales, while keeping other factors such as costs and investment constant, generally have a positive effect on a company's ROI by increasing total revenue, and subsequently, the net income without altering the investment amount.
Step-by-step explanation:
The question of what effect will increasing sales have on a company's ROI assuming other factors remain constant touches on fundamental principles of business and economics. Return on Investment (ROI) is a measure of the profitability relative to the investment made. Given that other factors, including costs and investment remain constant, an increase in sales will increase the total revenue which, in turn, should improve the ROI of the company. This is because ROI is calculated by dividing the net income (which would increase with increased sales) by the total investment (which remains constant).
Let's consider an example in line with the provided references, where a perfectly competitive firm sells a product at a fixed market price. If this firm increases the quantity of its product sold without increasing the production cost proportionally (due to economies of scale or increased efficiency), the total revenue will increase. Assuming costs are fixed, as with the band's example, selling more units at the same price raises total revenue and, therefore, the profit, enhancing the ROI.
However, it's important to consider price elasticity of demand. If the price were to increase instead of the quantity sold, it could potentially reduce the number of units sold if the demand is elastic. This situation is highlighted with the scenario of the band considering ticket prices. To maximize their total revenue, the band must find the optimal balance between ticket price and quantity sold based on the demand curve.