T Elasticity of demand Movie Tickets Problem Solving and App

T Elasticity of demand: Movie Tickets Problem Solving and Application: The table below provides a demand schedule for movie tickets. Use the information to complete the table. Answer the following questions based on your responses in the table. USE THEMIDPOINTFORMULATOGENRATE THEELAST?C?T?ESOPDEMAND. _chanremthequantit. Change in Price (Sum of the prices (Sum of the quantities) Calculate the total revenue and elasticity of demand using the following demand sehedule: Price Quan tity Total Revenue Coefficient of Flasticity Demand 5 40 35 30 25 20 15 10 10 15 20 25 30 35 1. Over what range of prices is demand for tickets elastic? 2. To maximize total revenue, should the theater raise or lower the price within this range? 3. Over what range of prices is demand for tickets is inelastic1? 4. To maximize total revenue, should the theatre raise or lower the price within this range 5. 6. Over what range of prices is demand for tickets unit elastic? To maximize total revenue, should the theatre raise or lower the price within this range

Solution

Total Revenue = Price * Quantity

1. Range over which demand of ticket is elastic

From $ 20 to $ 40 demand of tickets is elastic.

2. In case of elastic demand the firm must lower the price of their output in order to raise Total Revenue.

3. Range over which demand is inelastic

from $ 5 to $ 20 demand of tickets is inelastic.

4.In case of inelastic demand the firm must raise the price of their output in order to raise Total Revenue.

5. Unitary Elastic (e = 1)

Here from the given Demand Schedule at no price elasticity of demand is Unitary elastic.

Unitary elastic point will lie somewhere in between $20 to $15.

6. In case of Unitary Elastic the total revenue is maximum thus, their is no impact of increase or decrease in price on the total revenue. Since, Price Effect = Quantity Effect.

Price	Quantity	Total Revenue	Coefficient of Elasticity
$40	0	$0
35	5	$175	-15
30	10	$300	-4.33
25	15	$375	-2.2
20	20	$400	-1.28
15	25	$375	-0.78
10	30	$300	-0.45
5	35	$175	-0.23