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The current price charged by a local movie theater is $8 per ticket. At the current ticket price, the theater typically sells 300 tickets per showing. If the theater raises ticket prices to $9, the theater will sell 270 tickets.

a. Assuming that the demand (curve) for tickets is linear, calculate the point price elasticity of demand for tickets at both $8 and $9.

b. Given the above values, determine the arc price elasticity of demand for tickets.

c. Given the elasticity values you calculated in parts a and b explain if the theater is operating on the elastic or inelastic portion of its demand curve.

d. Determine what happens to ticket revenue if the theater increases ticket prices from $8 to $9, and explain if this is consistent with the elasticity values you calculated.

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M91723068

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