Prior to the 2017 season, the Atlanta Falcons, an American football team in the state of Georgia, discussed the possibility of introducing “street pricing” (a price reduction) for their concessions
Prior to the 2017 season, the Atlanta Falcons, an American football team in the state of Georgia, discussed the possibility of introducing “street pricing” (a price reduction) for their concessions (i.e. food and drinks) at their home stadium in order to improve the fan experience, we will simplify the analysis and think of demand for concessions in bundles with each bundle representing a random combination of food, snacks, and drinks. Suppose the actual quantity demanded for a concession bundle prior to 2017 can be represented by the following demand function: Qc = 3500 – 62.5Pc – 25Pt where QC is the number of concession bundles sold during a season (measured in thousands), PC is the price of one concession bundle (the average amount spent at a game per fan), and PT is the price of a ticket to a game. a. Given an average ticket price (Pt) of $80, what is the own-price elasticity (OPE) of demand for concessions when Pc is $16? Show your work as much as possible, including the formula for own price elasticity. b. Given the elasticity of demand from part (a), what would happen to total concession revenues if the Falcons go forward with the proposed “street pricing” and reduce the price of concessions? How do you know based on your understanding of own price elasticities?