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 -0.70, and the price elasticity of demand for matinee moviegoers is -2.80.

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


Choose one:
A. Lower the price for matinee moviegoers, and raise the price for weekend and evening patrons.
B. Raise the price for matinee moviegoers, and keep the price the same for weekend and evening patrons.
C. Raise the price for matinee moviegoers, and lower the price for weekend and evening patrons.
D. Lower the price for matinee moviegoers, and keep the price the same for weekend and evening patrons.

Answer 1

A I believe I hope I helped

Answer 2

A. Lower the price for matinee moviegoers, and raise the price for weekend and evening patrons.

Step-by-step explanation:

The price elasticity of demand gives the percentage change in demand with a one percent increase.

Ther are usually negative, but we can work with the absolute values.

An absolute value lesser than 1 is relatively inelastic, so the price should be raised to the unitary elasticity demand(1).

Otherwise, if it is higher than 1, the effect on demand is relatively elastic, so the price should be lowered.

The price elasticity of demand for weekend and evening patrons is -0.70. So the price for weekend and evening patrons should be raised.

The price elasticity of demand for matinee moviegoers is -2.80. So the price for matinee moviegoers should be lowered.

So the correct answer is:

A. Lower the price for matinee moviegoers, and raise the price for weekend and evening patrons.