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CENARIO: You work for a movie theater that charges the same ticket price of $9 to everyone. After careful analysis, you realize that the are
CENARIO: You work for a movie theater that charges the same ticket price of $9 to everyone. After careful analysis, you realize that the are to distinct demand schedules (see below) for movie goers. One for adults, and another for teenagers. The manager wants to optimize pricing and revenue across these segments. She asks you to analyze the elasticities to recommend changes. 1. For each of the demand schedules calculate price elasticity of demand for a decrease in price from $10 to $9 and for $4 to 3 ? Based on your answers, which age group has the most elastic demand? Show your work. 2. How could the theater leverage differences in elasticities across age groups? Suggest a pricing strategy that maximizes revenue? In other words, which price would you charge the teenagers and the adults. Explain your rationale. 3. Which factors make a demand more elastic? Which of these factors do you think is more influential to explain the differences in elasticities between adults and teenagers? Hint: Read Ch 5 4. Think about yourself as a worker selling your labor. How could you leverage knowledge of the factors that determine elasticity to increase your potential wages? Remember, for labor your total revenue is wages (nricel x xhours worked (ouantity)
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