You Own a Small Town Movie Theatre

question 499

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 $2 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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