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he director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand or tickets. The firm has classified people who go to the theater into two groups and has ome up with two demand functions. The demand curves for the general public (Qgp) nd students (Qs) are given below: Qgp = 500 – 5P Qs = 200 - 4P a. Graph the two demand curves on one graph, with P on the vertical axis and Q on the horizontal axis. If the current price of tickets is $35, identify the quantity demanded by each group. b. Find the price elasticity of demand for each group at the current price and quantity. c. Is the director maximizing the revenue he collects from ticket sales by charging $35 for each ticket? Explain. d. What price should he charge each group if he wants to maximize revenue collected from ticket sales?

he director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand or tickets. The firm has classified people who go to the theater into two groups and has ome up with two demand functions. The demand curves for the general public (Qgp) nd students (Qs) are given below: Qgp = 500 – 5P Qs = 200 - 4P a. Graph the two demand curves on one graph, with P on the vertical axis and Q on the horizontal axis. If the current price of tickets is $35, identify the quantity demanded by each group. b. Find the price elasticity of demand for each group at the current price and quantity. c. Is the director maximizing the revenue he collects from ticket sales by charging $35 for each ticket? Explain. d. What price should he charge each group if he wants to maximize revenue collected from ticket sales?

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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The director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand for tickets. The firm has classified people who go to the theater into two groups and has come up with two demand functions. The demand curves for the general public (Qgp) and students (Qs) are given below: Qgp 500 - 5P Qs = 200 - 4P a. Graph the two demand curves on one graph, with P on the vertical axis and Q on the horizontal axis. If the current price of tickets is $35, identify the quantity demanded by each group. = b. Find the price elasticity of demand for each group at the current price and quantity. c. Is the director maximizing the revenue he collects from ticket sales by charging $35 for each ticket? Explain. d. What price should he charge each group if he wants to maximize revenue collected from ticket sales?
Transcribed Image Text:The director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand for tickets. The firm has classified people who go to the theater into two groups and has come up with two demand functions. The demand curves for the general public (Qgp) and students (Qs) are given below: Qgp 500 - 5P Qs = 200 - 4P a. Graph the two demand curves on one graph, with P on the vertical axis and Q on the horizontal axis. If the current price of tickets is $35, identify the quantity demanded by each group. = b. Find the price elasticity of demand for each group at the current price and quantity. c. Is the director maximizing the revenue he collects from ticket sales by charging $35 for each ticket? Explain. d. What price should he charge each group if he wants to maximize revenue collected from ticket sales?
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