1. An art museum would like to increase the revenue it earned from ticket sales. In this situation, knowledge of price elasticity would be very important in aiding the museum manager in setting the price of tickets. After the manager has conducted the necessary market research, it was determined that the price elasticity of demand for museum tickets is inelastic. With this information, the museum manager would decide to increase the price of tickets. This is because the increase in price would outweigh the decline in ticket sales; therefore, the profits of the museum would increase.
2. A pizzeria would like to increase the revenue it earned from the sale of pizzas. In this situation, knowledge of price elasticity would be very important in aiding the pizzeria owner in setting the price of its pizza. After the owner has conducted the necessary market research, it was determined that the price elasticity of demand for pizza is elastic. With this information, the pizzeria owner would decide to reduce the price of its pizza. This is because the decrease in price would induce more people to buy pizza; therefore, provided pizzas are still being sold at a profit, the profits of the pizzeria would increase.
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