Elasticity & Revenue

I recently read an article explaining the relationship between price elasticity and total revenue. Bond (1998) states that the "musicians in Montreal believe they should be paid the same as their counterparts with the Philadelphia Orchestra"(P3). The Montreal Orchestra is part of a union which has demands on the requirements the Orchestra should pay the musicians at. Bond (1998) examines the following demands: Subsidies from Quebec, Income from the Orchestra and the sales of tickets. There is a correlation between the ticket sales and total revenue which can be defined as elasticity(P7). This concept of elasticity allows businesses to analyze the changes in prices and how it will impact their total revenue. In order for the Orchestra to increase their total revenue they require time to increase their audiences/ticket sales.

Bond (1998) states the  "union has threatened to boycott rehearsals" and "without rehearsals the performance would suffer-poor performances result in low ticket sales"(P20). The below graph indicates the relationship between elasticity and total revenue. Ticket sales are required in order to make revenue. The musicians need to be at rehearsal to increase their performance and ticket sales. The musicians want an increase in salary and get the same compensation like the Philadelphia Orchestra. If they do not receive the increase they will not attend rehearsals. The ticket sales will start to decline as the musicians are not rehearsing. Since the ticket sales are declining the price begins to decrease as well. The upper part of the demand curve is elastic which indicates the price falls and the total revenue will increase. The lower part of the demand curve is inelastic and the price falls and so does the total revenue.

Bond(1998) explains that the Montreal Orchestra needs to increase the number of concerts and prices of the tickets to have a result of increased salaries for the musicians(P16).

Bond, D. (1998, Jul 18). Montreal musicians hit sour notes: Unreasonable wage demands hold possibility for pianissimo finale rather than fortissimo encore. The Vancouver Sun, pp. E.21-E21. Retrieved from http://search.proquest.com/docview/242862051?accountid=13652

 http://search.proquest.com.libresources2.sait.ab.ca/docview/242862051/13480AEB5742973A9ED/8?accountid=13652