For many years the Flat Rock Playhouse near Hendersonville N

For many years. the Flat Rock Playhouse near Hendersonville, NC has been very popular often drawing sell-out crowds to popular off-Broadway type productions As a result, the company and open an additional venuo in downtown Hendersonville to offer addition , entertainment to both theatre and musical events Now the company is ma*ng special discount otter speoal promotions to try to attract audiences while that was a rare if not unheard of occurrence this time a Are these type promotions likely to be successful\' What information do you need to determine likely success or failure\' b How does marginal cost, fixed cost, and vanable cost affect pricing decisions for these type events\' In Greenville. SC, a large arena previously known as the Bi-lo Center was constructed several years ag to host differnt type events such as sports (minor league ice hockey), professional wrestling concerts etc Assume that you are the promoter of events at the arena How would you expect the following to affect demand for events at the arena Be sure to explain each answer. a A major event at the Peace Center in downtown Greenville - A major football game at Clemson about 30 miles away the closing of BMW. a major employer in the area - If the average ticket pnces for a Clemson University football game increases by 10% and the number c fans attending decreases by 5%. answer the following questions. Is demand for the football games elastic or inelastic Explain

Solution

QUESTION - 4

(a) Whether or not such a plan will be successful cannot be answered with given information. We need to know price elasticity of demand for the target market. If the market has inelastic demand, lowering price by discounts will not increase total revenue, but increasing prices will raise revenue. But if demand is elastic, then lower price will increase total revenue and the scheme will achieve success.

(b) For these types of events, a huge cost is incurred in terms of fixed cost of renting the theater for performance and for hiring the performance band. The fixed cost occupies the largest share of cost structure. Marginal and variable costs vary with the number of shows performed, which are much less compared to the fixed cost.

QUESTION - 5

(a) A major event at a near location will act as a substitute for my firm\'s events. So, demand for events at my area will go down because of existence of another substitute event available at near location.

(b) A major game 30 miles away will most probably leave my demand unchanged, provided consumers do not want to travel so much to attend the football event. But if consumers are willing to travel 30 miles, then the football event becomes a substitute for my events and demand for my events will go down.

(c) Closure of BMW will result in lay-off of many local residents, whose income will decrease. Lower income of consumers will lower the demand for my events, since in the case of job loss, the affected consumers immediately cut-down on non-necessity expenses like entertainment.

QUESTION - 6

Price elasticity of demand = Change in quantity demanded / Change in price

= - 5% / 10%

= - 0.5

Since absolute value of elasticity (0.5) is less than 1, demand is inelastic.