Elasticity of demand , Microeconomics

The Bushman Cinema is the only movie theatre located in the medium-size country town of Sleepy Hollow.  The owner wants to charge an admission fee of $10 per seat and past experience suggests that at this price the theatre will be two-thirds full. An economist visiting the town tells the owner that he thinks demand is linear (represented by a straight-line) and that the elasticity of demand  is -0.78. Should the owner raise the price, lower the price or leave it unchanged if she wants to maximise revenue?  Give reasons for your answer.

 

 

Posted Date: 2/26/2013 8:15:38 AM | Location : United States







Related Discussions:- Elasticity of demand , Assignment Help, Ask Question on Elasticity of demand , Get Answer, Expert's Help, Elasticity of demand Discussions

Write discussion on Elasticity of demand
Your posts are moderated
Related Questions
Problem 1: (a) Differentiate between positive and negative externalities? Justify your answer using examples. (b) To what extent do government policies influence externali

The plant cell when placed under hypertonic medium loses a great quantity of water and its cell membrane detaches from the cell wall. In that situation the cell is known as plasmol

You just opened a flower shop and are trying to understand pricing issues. You were told that elasticities are very important in determining prices and what products to supply, so

The demand functions for two related commodities are expressed as follows    Q 1 = (12P 2 3/4 ) / (P 1 1/2 ) Q 2 = (24P 1 2 ) / (P 2 3/5 ) Where Q 1  and Q 2 are d

Answer in true or false 1.  "Improvements in environmental quality of a recreational site will, all other things being equal, increase consumer surplus of individuals that visit

What is a Market? Markets A geographically stated area where buyers and sellers interact or communicate to decide the price of a product or a series of products. Marke

The Hypothesis of Inflation-Unemployment Trade-off : This hypothesis about formation of expectations is therefore known as the hypothesis of adaptive expectations. The hypothes

How the above would apply to non-renewable resources such as oil. This has general applicability to any competitive market. The issue here is that potential supply has a finite

GIVE AND EXPLAIN IN DETAIL,ARGUMENTS GIVEN TO EXPLAIN LEONTIEF''S EMPERICAL FINDINGS ON THE HECKSCHER-OHLIN MODEL OF TRADE.

. Keep slope of supply constant and apply different slopes of demand curve and then show what happens if control price impose. Similarly, keep demand curve constant and apply diffe