Answer to Question #114014 in Microeconomics for t h

Question

Suppose a movie theater determines it can charge different prices to patrons who go to weekday matinees and people who attend evening and weekend shows . The movie theater’s goal is to increase total revenue.

The price elasticity of demand for weekend and evening patrons is -0.40, and the price elasticity of demand for matinee moviegoers is -2.50.

Based on the price elasticity of demand for each group of people, how should the movie theater adjust its prices?

Answer 1

As the price elasticity of demand for weekend and evening patrons is -0.40, then the demand is inelastic, and a movie theater should increase price for them to increase total revenue. As the price elasticity of demand for matinee moviegoers is -2.50, then the demand is elastic, and a movie theater should decrease price for them to increase total revenue.