Question

You are the curator of a museum. The museum is running short of funds, so you decide to increase revenue. Should you increase or decrease the price of admission? Explain

Answer 1

Step-by-step explanation:

If the museum is running short of funds, and you decide to increase revenue. An increase or decrease in the price of admission into the museum depends on the following:

1. If demand for admission into the museum is elastic there are two possible outcomes

a. An increase in the price of admission leads to a decrease in the quantity demand of admission into the museum

b. A decrease in price of admission into the museum leads to an increase in the quantity demand of admission into the museum.

This follows the law of demand which states that "the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded".

2. If the demand for admission into the museum is inelastic, then an increase in price will lead to an increase in revenue of the museum.

Therefore, before the curator increase the price of admission into the museum, he should first determine the price elasticity of demand of the museum.