In a local theatre, 2000 tickets can be sold in a week when the price of...
In a local theatre, 2000 tickets can be sold in a week when the price of a movie is set at $10 week. According to market research, Ed (price elasticity of demand) is 0.8. Now the management of the theatre has decided to raise the price of a movie to be $12.
(The formula of Ed is for your reference.)
37) The weekly demand of tickets is going to __________.
A) decrease by 10%
B) decrease by 12%
C) decrease by 14%
D) decrease by 16%
E) decrease by 18%
38) The weekly revenue is going to __________.
A) decrease by $260
B) have no change
C) increase by $160
D) increase by $260
E) increase by $360
Homework Answers
1.
D) decrease by 16%
Explanation :
Price elasticity = Percentage change in quantity demanded /percentage change in price
0.8=percentage change in quantity demanded /20
16=percentage change in quantity demanded.
Percentage change in price =(P2 - P1) /P1
=(12-10)/12]
=2/10
=20%
2.
C) increase by $160
Explanation :
Total revenue when price is 10.
TR =Q *P
=10*2000
=20,000
Total revenue when price is 12.
Quantity demanded will decrease by 16%.
2000-16%=1680.
TR =Q*P
=1680*12
=20160.
So total revenue is increase by=20,160-20,000=160.
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