Answer to Question #300926 in Microeconomics for ryan

Question

1.    Elasticity

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.     15 Marks

           

Answer 1

Answer.

Theaters get to keep between 10% and 50% of the ticket price they sell.The better the film does, the more the studio will often take.

The elasticity of demand between $5 and $2 is 0.21, which is inelastic and implies that less revenue will be collected due to inelasticity.

key determinant of the price elasticity of supply is the time period under consideration.The number of firms in a market tends to be more variable over long periods of time than over short periods of time.