Final answer:
Revenue recognition involves determining if collection is likely. This is evaluated alongside the concept of price elasticity of demand, which influences total revenue by affecting the price and quantity relation.
Step-by-step explanation:
The collectibility criteria in the context of revenue recognition specifies that a contract only exists for the purpose of revenue recognition if the seller believes that the collectibility of the transaction price is likely to be collected. This assessment is crucial because it ensures the company can confidently recognize the revenue expected from the contract.
When thinking about collecting the most revenue, a related concept is the price elasticity of demand. When demand is elastic, total revenue is maximized by finding the right balance between the price set and the quantity sold. Price elasticity affects the number of tickets a band might sell at a certain price, influencing the total revenue.
For example, if the demand is highly elastic, setting a higher price may lead to a decrease in quantity sold that outweighs the price increase, thus reducing total revenue.