Textbook Exercise #7 The director of a theater company in a small college town is considering changing the way he prices

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Textbook Exercise 7 The Director Of A Theater Company In A Small College Town Is Considering Changing The Way He Prices 1 (34.13 KiB) Viewed 19 times

Textbook Exercise 7 The Director Of A Theater Company In A Small College Town Is Considering Changing The Way He Prices 2 (41.58 KiB) Viewed 19 times

Textbook Exercise #7 The director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand for tickets. The firm has classified people who go to the theater into two groups and has come up with two demand functions. The demand curves for the general public (Q) and students (Q) are given below Q-400-SP Q-250-SP Graph the two demand curves in the figure to the right. If the current price of tickets is $10, identify the quantity demanded by each group To do this, graph the demand curve for the general public (D) using the line drawing tool. Attach the provided label Then, graph the demand curve for students (D) using the line drawing tool. Again, attach the provided label. Next using the point drawing tool, plot the price-quantity coordinate for the general public (gp) and students (s) when the price of tickets is $10. Attach the appropriate provided labels. If you are not prompted for a label, then you have used the wrong drawing tool Find the price elasticity of demand for each group at the current price and quantity The price elasticity of demand for the general public is and the price elasticity of demand for students is inder numeric responses using real numbers rounded to two decimal places include negative signs is the director maximizing the revenue he collects from ticket sales by charging $10 for each ticket? Explain The director OA is not maximizing revenue since both price elasticities are inelastic, suggesting that by increasing price, revenue will increase OB. is maximizing revenue since both price elasticities are smaller than one in absolute value OC. is not maximizing revenue since both price elasticities are smaller than one in absolute value, suggesting that by decreasing price, revenue will increase OD is not maximizing revenue since both price elasticities are negative, suggesting that by increasing price, revenue will increase OE is maximizing revenue since nether price elasticity of demand is equal to minus one Price 100 w NO 70 80- 50H 46 30 20 10 so 100 150 200 250 300 Quantycket) APP
To do this, graph the demand curve for the general public (Dap) using the line drawing tool. Attach the provided label. Then, graph the demand curve for students (D,) using the line drawing tool. Again, attach the provided label. Next, using the point drawing tool, plot the price-quantity coordinate for the general public (gp) and students (s) when the price of sickets is $10. Attach the appropriate provided labels. If you are not prompted for a label, then you have used the wrong drawing tool Find the price elasticity of demand for each group at the current price and quantity. The price elasticity of demand for the general public is and the price elasticity of demand for students is. (Enter numeric responses using real numbers rounded to two decimal places. Include negative signs.) is the director maximizing the revenue he collects from ticket sales by charging $10 for each sicket? Explain. The director OA is not maximizing revenue since both price elasticities are inelastic, suggesting that by increasing price, revenue will increase OB. is maximizing revenue since both price elasticities are smaller than one in absolute value. OC. is not maximizing revenue since both price elasticities are smaller than one in absolute value, suggesting that by decreasing price, revenue will increase. OD is not maximizing revenue since both price elasticities are negative, suggesting that by increasing price, revenue will increase. OE is maximizing revenue since neither price elasticity of demand is equal to minus one. What price should he charge each group if he wants to maximize revenue collected from ticket sales? To maximize revenue, the director should set price for the general public equal to $ and the price for students equal to Price 70 60 50 40 30 20- 10 + 50 100 150 200 250 300 350 400 450 Quantity (ickets)