What is the income elasticity of demand for movie tickets

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Reference no: EM13162128

1. You manage a movie theatre, and you hire a statistical consultant to estimate the demand for movie tickets. Using monthly data, the consultant estimates the following demand function for movie tickets at your theatre (the only one in town):

Q = 7,000 - 5,000P - 6,000 P_dvd+ 1501+ 1,000A

where:

Q = the quantity of movie theatre tickets demanded P = the price of a movie theatre ticket

= the price of new release DVDs

1= income per household (in thousands of $)

A = advertising expenditures (in thousands of $)

Assume: P = $5

PDVD = $4

1= $60

A= $20

a. one of the signs in the estimated equation might be wrong? Which sign appears to be wrong?

I know the answer for part a. since Dvd is a supplement the sign is positive before 6000 Pdvd. I need answers for part b and d.

b. After correcting the sign in the demand function, what is price elasticity of demand for movie tickets?

c. What is the income elasticity of demand for movie tickets?

Reference no: EM13162128

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