Question

Hollywood Amusement, a small independent movie theater, decreased the price of admission from $10 to $9. Prior to the price decrease, the business sold 1,000 tickets each month. After the price decrease, it experienced ticket sales of 1,500 a month. If the change in sales is attributable only to the change in price, Hollywood Amusement faces ____ for its movie tickets.

Answer 1

Elastic demand

Step-by-step explanation:

Elasticity of demand is a measure of how the demand for a product or service responds to changes in price, or other factors. Price elasticity of demand tries to understand the relationship between price and the quantity demanded. It indicates how a change in price affects demand.

A product is price elastic if a change in price has a significant impact on its demand. On the other end, if demand is not affected by changes in prices, the product has inelastic demand.

Hollywood Amusement reduced its prices and the demand went up significantly. It shows that its service is very responsive to changes in prices. The service then has an elastic demand. An increase in price will lead to a decrease in demand.