Assignment, assume the role of CEO of the following hypothetical company: Big Time Entertainment. Big Time Entertainment is a nationwide firm providing movies, concerts, arcades, and other in-person entertainment venues such as bowling and roller skating. Our operations have been heavily impacted during the Covid-19 pandemic, including continuing limits on the number of guests and new costs associated with safety measures for both staff and customers. We are now reopening but facing continued cost-push inflation. We also face uncertainty as to the potential for additional shutdowns. Customers are fearful, and the guidance on operating our facilities means we are operating far below our optimal number of patrons to cover the higher cost of everything. The price elasticity of demand is 1.6, and we are also faced with competition from online entertainment and gaming, which are not experiencing many of these cost pressures.

Within the context of your hypothetical company of which you are the CEO:

1. Is the demand curve for your product relatively elastic, inelastic, or unitary elastic? Demonstrate this for your company's product by how much the quantity demanded will change if you pass on the 10% increase in cost. In other words, prepare a forecast showing by what percentage the quantity demanded will change if your prices are raised by 10%. You must provide calculations showing the percentage change in quantity demanded.
2. Will you pass on most or all of the cost increase to your customers? Why or why not?