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Assume that the demand function for women’s basketball tickets is as follows:
Qd = 20,000 - 2,000P
1) Graph the demand curve, and give some verbal interpretation. Compute the intercept and slope of the demand curve.
2) Use the calculus formula to calculate the point elasticity at the price of $4.00. Give a verbal interpretation of this elasticity. Is the elasticity considered “elastic” or “inelastic”?
3) Using the elasticity you just computed, what would happen to attendance if the price were to be reduced by 7%? By what percentage will ticket sales change? Would this increase or decrease total revenue?
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Find out the equation for the linear supply curve which fits this information. What would the new equilibrium price and quantity be if supply were to increase by 20%.
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