Question: Suppose that the demand schedule for entry into an Art Gallery is presented in the following table.

Price (dollars per visitors) Quantity demanded (number of visitors per week)
0.00 1200
1.00 1050
2.00 900
3.00 750
4.00 600
5.00 450
6.00 300
7.00 150
8.00 0

(a) Calculate the price elasticity of demand between each price change i.e. between $2.00 and $3.00, between $3.00 and $4.001 etc. Calculate the sales revenue at each price and explain the relationship between revenue and price elasticity of demand.

(b) The price of admission is currently $4.00 per person. Art Gallery argues that the Gallery needs to raise the price by $1.00 dollar in order to increase its revenue. The Gallery has hired you to estimated the demand for admission and recommend a pricing policy. On the data available what advice can you give them?