The cinema aduiences have been falling since the mid-90s. In order to attract mroe audience, the owners of cinemas decided to offer a discount ticket price on every Tuesday. The ticket price on other weekdays remains unchanged. Suppose the demand for watching movies in cinema is elastic.
With the aid of separate diagrams, explain the effect of this policy on
a) the revenue of cinemas on Tuesdays;
b) the revenue of cinemas on other weekdays.
Econ questions
2009-01-11 7:02 pm
回答 (2)
2009-01-17 2:19 pm
✔ 最佳答案
(a)圖片參考：http://f20.yahoofs.com/hkblog/1o4zXniVEQVTy_tSMhfH__DOT__tHZ_1/blog/ap_20090117052804663.jpg.jpg?ib_____DKSDWzaz7
The ticket price on Tuesday falls and the quantity demanded for tickets increases. Given that the demand for cinema tickets is elastic, the total revenue of cinemas on Tuesday increases.
In the diagram, the change in revenue is the blue area minus the black area.
(b)
On other weekdays, there will be less cinema goers because more people will choose to go to cinema on Tuesday and less on other weekdays. The result is a fall in demand. In the short run, the supply of cinema tickets is fixed. In the long run, supply is upward sloped because new cinemas can be built or old ones redeveloped.
圖片參考：http://f20.yahoofs.com/hkblog/1o4zXniVEQVTy_tSMhfH__DOT__tHZ_1/blog/ap_20090117060305251.jpg.jpg?ib_____D6H_gPStw
The price of cinema tickets remain unchanged. When demand falls from D1 to D2, quantity demanded falls as well. The blue area is the decrease of total revenue on other weekdays.
The answer by 001 has a mistake in (a). The demand elasticity does not depend on the slope of the demand curve. A gentle slope does not guarantee elastic demand. It is the position on the demand curve that determines elasticity. To indicate demand is elastic, the price is at the upper portion of the demand curve. At the lower portion of the demand curve, demand is inelastic.
2009-01-12 11:02 pm
a) As the demand on watching the movies is elastic, lower the tickets' prices would increase the quantity demanded on it (% increase in quantity demanded is higher than the % decrease in price), thereby increasing revenue of cinemas on Tuesdays. You can draw a relatively less-sloped demand curve and indicate that lowering the price results in increase in revenue (area under the demand curve)
b) As those people who do not see movies will see movies on Tuesdays and the number of people seeing movies on other weekdays remain the same, the revenue of cinemas on other weekdays remain the same. (Draw the demand curve, without any change in price and quantity demanded)
b) As those people who do not see movies will see movies on Tuesdays and the number of people seeing movies on other weekdays remain the same, the revenue of cinemas on other weekdays remain the same. (Draw the demand curve, without any change in price and quantity demanded)
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