You Own a Small Performance Theatre

question 26

Essay

You own a small performance theatre. You currently charge R5 per ticket for everyone who comes. Your friend, who took an economics course at University, tells you that there may be a way to increase your total revenue. Given the demand curves shown, answer the following questions.
a. What is your current total revenue for both children and adults?
b. The elasticity of demand is more elastic in which market?
c. Which market has the more inelastic demand?
d. What is the elasticity of demand between the prices of R5 and R2 in the adult market? Is this elastic or inelastic?
e. What is the elasticity of demand between R5 and R2 in the children's market? Is this elastic or inelastic?
f. Given the graphs and what your friend knows about economics, he recommends you increase the price of adult tickets to R8 each and lower the price of a child's ticket to R3. How much could you increase total revenue if you take his advice?

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Definitions:

Enforce Contracts

The process of legally ensuring that the terms of a contract are carried out as agreed, often involving judicial or regulatory intervention.

External Benefits

Advantages or positive effects generated by an economic activity that benefit individuals or entities not directly involved in the activity.

Market Forces

The natural forces of supply and demand that govern the functioning of the free market, determining prices and production levels.

Rival

Describes a good or resource that cannot be consumed by more than one person or entity at the same time without diminishing its availability to another.