A research firm finding concluded that the price elasticity of demand for movie tickets is elastic in the afternoon but inelastic in the evenings.Given this information,to increase overall revenue the theatre owners should
A)Reduce the ticket prices for the afternoon shows and reduce the ticket prices for the evening shows
B)Increase the ticket prices for the afternoon shows and reduce the ticket prices for the evening shows
C)Reduce the ticket prices for the afternoon shows and increase the ticket prices for the evening shows
D)Increase the ticket prices for the afternoon shows and increase the ticket prices for the evening shows

Question

Quizplus · Accepted Answer

Since the price elasticity of demand is elastic in the afternoon, reducing ticket prices will lead to an increase in demand and therefore revenue. On the other hand, increasing ticket prices in the evening shows will not lead to a significant decrease in demand (inelastic), and will result in an increase in revenue due to higher prices. Therefore, reducing prices for afternoon shows and increasing prices for evening shows will maximize revenue.

A Research Firm Finding Concluded That the Price Elasticity of Demand