You Own a Small Town Movie Theatre

question 262

Essay

You own a small town movie theatre.You currently charge $5 per ticket for everyone who comes to your movies.Your friend who took an economics course in college 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 groups?
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 $5 and $2 in the adult market? Is this elastic or inelastic?
e.What is the elasticity of demand between $5 and $3 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 $8 each and lower the price of a child's ticket to $3.How much could you increase total revenue if you take his advice?

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Definitions:

Promotional Efforts

Activities and campaigns designed to increase awareness or sales of a product or service, typically involving advertising and marketing tactics.

Six-month Moving Average

A method of smoothing data by calculating the average of six consecutive months' worth of data, continuously updated month by month.

Mean Absolute Deviation

A statistical measure of the average absolute deviations of a set of values from their mean, indicating variability within the dataset.

Forecast Error

The difference between the actual outcomes and the predictions made by forecasting models.