You are in charge of the local city-owned aquatic center. You need to increase the revenue generated by the aquatic center to meet expenses. The mayor advises you to increase the price of a day pass. The city manager recommends reducing the price of a day pass. You realize that
A) the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
B) both the mayor and the city manager think that demand is elastic.
C) both the mayor and the city manager think that demand is inelastic.
D) the mayor thinks demand is inelastic, and the city manager thinks demand is elastid.

Question

Quizplus · Accepted Answer

The mayor suggests increasing the price of a day pass, indicating that they perceive that demand for the aquatic center is relatively inelastic and that a price increase will generate more revenue than the potential decrease in demand. On the other hand, the city manager suggests decreasing the price, indicating that they perceive that demand for the aquatic center is relatively elastic and that a price decrease will generate more revenue due to the increase in demand. Therefore, by taking both suggestions into account, it is advisable to run a market analysis to determine the elasticity of demand and set the price accordingly to maximize revenue without reducing demand significantly.

You Are in Charge of the Local City-Owned Aquatic Center