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Crown Cinema recently increased the price of a movie ticket by 5%. As a result, attendance dropped by 8%. Based on this information, what is the price elasticity of demand for movie tickets at Crown? What, if any, other factors could have accounted for some of the decline in attendance leading to an overinflated price elasticity of demand? If the cinema reduced its prices by 5% instead of raising its prices by 5%, what change in attendance would you expect? If a competing cinema reduced its prices by 10%, how would you expect this action to affect demand at Crown? How should the cinema determine an optimal ticket price?
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