Question
a) A local cinema increases its ticket price from $20 to $24. The quantity demanded of tickets soon decreases from 1600 to 1200 tickets per
a) A local cinema increases its ticket price from $20 to $24. The quantity demanded of tickets soon decreases from 1600 to 1200 tickets per week.
What is the price elasticity of demand? Use the percentage change method.
(Ed = %Q / %P).
(b) Briefly explain whether this price increase by the cinema in the example above will increase or decrease total revenue.
(The next two questions below do not relate to the calculations above.)
(c) True or false? As the price of oranges rises, the demand for oranges falls, ceteris paribus. Explain your answer
(d) Briefly explain what is meant by 'elastic demand' and 'inelastic demand'. Provide an example for each.
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Economics of Money, Banking and Financial Markets
Authors: Frederic S. Mishkin
9th Edition
978-0321607751, 9780321599797, 321607759, 0321599799, 978-0321598905
