Question

6-3: To conduct an experiment, AMC increased movie ticket prices from 9.00 to 10.00 and measured the change in ticket sales. Using the data over the following month, they concluded that the increase wsa profitable. However, over the subsequent months, they changed their minds and discontinued the experiment. 1.How did the tming affect their conclusion about the profitablitiy of increasing prices? 2. What would happen to the elasticity of the demand in the long run? 6-5: An end-of-aisle price promotion changes the price elasticity of a good from-2 to -3. If the normal price is $10, what should the promotional price be? Use (P-MC)/P 1/lel to calculate MC, and then use the same equation to find out the nevw price.

Answer 1

1.Timing affect their decision by following manner :

In one month consumer does not realise effect of price changes on their pocket thats why rhey are inelastic Even after knowing it they keep buying because of habit or no option of alternative for such a shot period of time .However they start looking for alternative to switch themselves towards it.

2.elasticity of demand in the long run:

In the long run it will be much more elastic as consumer will realise change in price is permanent and they have time to look towards different option.