The manager at Ruby Red Movie Theater decided to change the prices of concession stand items as well as tickets this month in an effort to increase revenues. Below, you are provided with prices for last month and this month as well as the quantities demanded for both months. Use this information when answering questions A–H below. Price Quantity Demanded Item Last Month This Month Last Month This Month Large Drink $6.00 $5.50 150 161 Large Popcorn $7.50 $8.00 125 101 Small Drink $2.50 $2.00 75 80 Small Popcorn $5.00 $5.25 45 39 Candy $4.00 $3.50 57 68 Hot Dog $5.00 $5.25 35 36 Movie Ticket $8.00 $9.00 428 300 A. Calculate the total revenues earned by the theater last month and this month (Show your work.) Total revenues last month = Total revenues this month = B. Calculate the price elasticity of demand for large drinks. (Show your work.) Is the price elasticity of demand for large drinks price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below. C. Calculate the price elasticity of demand for large popcorn. (Show your work.) Is the price elasticity of demand for large popcorn price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below. D. Calculate the price elasticity of demand for small drinks. (Show your work.) Is the price elasticity of demand for small drinks price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below. E. Calculate the price elasticity of demand for small popcorn. (Show your work.) Is the price elasticity of demand for small popcorn price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below. F. Calculate the price elasticity of demand for candy. (Show your work.) Is the price elasticity of demand for candy price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below G. Calculate the price elasticity of demand for hot dogs. (Show your work.) Is the price elasticity of demand for hot dogs price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below. H. Calculate the price elasticity of demand for movie tickets. (Show your work.) Is the price elasticity of demand for movie tickets price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below. Question 3 Based on the relationship between price elasticity of demand and total revenues, evaluate whether the individual price changes the manager made were correct or not. Remember, Ruby Red Movie Theater wants to increase total revenue. A. Was the decision to decrease the price of large drinks appropriate to increase total revenues? Why, or why not? Briefly explain in the box below. B. Was the decision to increase the price of large popcorn appropriate to increase total revenues? Why, or why not? Briefly explain in the box below. C. Was the decision to decrease the price of small drinks appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
Question 2
The manager at Ruby Red Movie Theater decided to change the prices of concession stand items as well as tickets this month in an effort to increase revenues. Below, you are provided with prices for last month and this month as well as the quantities demanded for both months. Use this information when answering questions A–H below.
|
|
Quantity Demanded |
|||||||
|
Item |
Last Month |
This Month |
Last Month |
This Month |
||||
|
Large Drink |
$6.00 |
$5.50 |
150 |
161 |
||||
|
Large Popcorn |
$7.50 |
$8.00 |
125 |
101 |
||||
|
Small Drink |
$2.50 |
$2.00 |
75 |
80 |
||||
|
Small Popcorn |
$5.00 |
$5.25 |
45 |
39 |
||||
|
Candy |
$4.00 |
$3.50 |
57 |
68 |
||||
|
Hot Dog |
$5.00 |
$5.25 |
35 |
36 |
||||
|
Movie Ticket |
$8.00 |
$9.00 |
428 |
300 |
A. Calculate the total revenues earned by the theater last month and this month (Show your work.)
Total revenues last month =
Total revenues this month =
B. Calculate the
C. Calculate the price elasticity of demand for large popcorn. (Show your work.) Is the price elasticity of demand for large popcorn price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below.
D. Calculate the price elasticity of demand for small drinks. (Show your work.) Is the price elasticity of demand for small drinks price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below.
E. Calculate the price elasticity of demand for small popcorn. (Show your work.) Is the price elasticity of demand for small popcorn price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below.
F. Calculate the price elasticity of demand for candy. (Show your work.) Is the price elasticity of demand for candy price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below
G. Calculate the price elasticity of demand for hot dogs. (Show your work.) Is the price elasticity of demand for hot dogs price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below.
H. Calculate the price elasticity of demand for movie tickets. (Show your work.) Is the price elasticity of demand for movie tickets price elastic, inelastic, or unit (unitary)? Briefly explain why in the box below.
Question 3
Based on the relationship between price elasticity of demand and total revenues, evaluate whether the individual price changes the manager made were correct or not. Remember, Ruby Red Movie Theater wants to increase total revenue.
A. Was the decision to decrease the price of large drinks appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
B. Was the decision to increase the price of large popcorn appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
C. Was the decision to decrease the price of small drinks appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
D. Was the decision to increase the price of small popcorn appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
E. Was the decision to decrease the price of candy appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
F. Was the decision to increase the price of hot dogs appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
G. Was the decision to increase the price of movie tickets appropriate to increase total revenues? Why, or why not? Briefly explain in the box below.
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