Question
The managing director of My Kori-Lima Movie Theatre Ltd has hired you as a consultant to advise on the ticket pricing strategy. As a basis
The managing director of My Kori-Lima Movie Theatre Ltd has hired you as a consultant to advise
on the ticket pricing strategy. As a basis for your recommendations you consider historical ticket
sales data which seems to suggest the following ticket sales elasticities:
Own price elasticity = -0.05
Refreshment price elasticity = -0.12
Nairobi Population elasticity = +0.65
Advertising elasticity = +0.70
(a) The managing director is contemplating a moderate increase in ticket prices in order to increase revenue. Explain whether this is a good idea. (5 marks)
(b) The managing director is also contemplating a moderate increase in the advertising budget in order to increase revenue. Is this a good idea? Explain. (5 marks)
(c) How would you characterize the relationship between tickets and refreshments? (5 marks)
(d) If the population of Nairobi increased from 120,000 to 122,400 people in the next year, what would be the resulting impact on ticket demand? Assume all other factors are held constant.
(5 marks)
(Total: 20 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started