The Current Price Charged by a Local Movie Theater Is

question 87

Essay

The current price charged by a local movie theater is $8 per ticket. The concession stand at the theater averages $5 in revenue for each ticket sold. 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. What is the price elasticity of demand at $8? What happens to ticket revenue if the theater increases ticket prices to $9 from $8? What happens to concession revenue if the theater increases ticket prices? If the theater wants to maximize the sum of ticket and concession revenue, should they raise ticket prices to $9?

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