Assume that there is only one movie theatre and only one video streaming outlet in a small town in northern Manitoba. The weekly demand by all the town people, for movies and streamed video rental is given below: a) What prices for movies and for videos would maximise the sellers revenue? At those prices, what are the quantity demanded for movies and videos? b) What is the price elasticity of demand for movies if the movie theatre changes the price from $6 to $5 and what is the change in TR? What does this suggest about the elasticity of demand for movies? c) What is the price elasticity of demand for movies if the movie theatre changes the price from $6 to $7 and what is the change in TR? What does this suggest about the elasticity of demand for movies? d) Suppose that the video outlet was charging the price that maximized TR, but the city government imposes an excise tax on videos that results in the price of streamed videos rising to $4.50. As a result, the demand for movies increases by 20 at each price. Calculate the cross elasticity of movies for videos. What does this say about the relationship between two products? e) Now suppose town people weekly income rise from $500 to 550 with the result that demand for movies increases 20 percent. If the price being charged is $6, what is the income elasticity of demand? What kind of product movie is?

\begin{tabular}{|l|l|l|l|l|l|} \hline P Movies & Q movies & TR movies & P videos & Q videos & TR videos \\ \hline$3 & 450 & & 2.00 & 950 & \\ \hline 4 & 400 & & 2.50 & 900 & \\ \hline 5 & 350 & & 3.00 & 825 & \\ \hline 6 & 300 & & 3.50 & 750 & \\ \hline 7 & 250 & & 4.00 & 650 & \\ \hline 8 & 200 & & 4.50 & 550 & \\ \hline 9 & 150 & & 5.00 & 425 & \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|l|l|} \hline P Movies & Q movies & TR movies & P videos & Q videos & TR videos \\ \hline$3 & 450 & & 2.00 & 950 & \\ \hline 4 & 400 & & 2.50 & 900 & \\ \hline 5 & 350 & & 3.00 & 825 & \\ \hline 6 & 300 & & 3.50 & 750 & \\ \hline 7 & 250 & & 4.00 & 650 & \\ \hline 8 & 200 & & 4.50 & 550 & \\ \hline 9 & 150 & & 5.00 & 425 & \\ \hline \end{tabular}