What is the price elasticity of its demand at this price

Assignment Help Business Economics

Reference no: EM13982313

The following equation represents the weekly demand that a local theater faces.

Qd = 2000 - 25 P + 2 A,

where P represents price and A is the number of weekly advertisements.

Presently the theater advertises 125 times per week. Assuming this is the only theater in town, and its marginal cost, MC, is equal to zero,

a. Determine the profit maximizing ticket price for the theater.

b. What is the price elasticity of its demand at this price?

c. What is the elasticity of its demand with respect to advertising?

d. Now suppose the theater increases the number of its ads to 250. Should the theater increase its price following this ad campaign? Explain.

Reference no: EM13982313

Questions Cloud

Shift the demand curve for a good or service : Which of the following changes would not shift the demand curve for a good or service?

CVP Analysis-Sustainability-Uncertainty-Decision Tables : With gasoline prices increasing rapidly in recent years, consumers have moved to high miles-per-gallon (mpg) vehicles, in particular hybrid autos that rely on a battery as well as a gasoline engine for even greater mpg. Generate a cost function for e..

Discuss and illustrate about inferior goods : Discuss and illustrates the terms with diagrams inferior goods and normal goods

What is the price elasticity of its demand at this price : The following equation represents the weekly demand that a local theater faces. Presently the theater advertises 125 times per week. Assuming this is the only theater in town, and its marginal cost, MC, is equal to zero, Determine the profit maximizi..

What was the dirty war? who were the disappeared : Why do you think the military forces in Latin America felt under siege during the 1960s and 1970s?

Importance of operations and supply chain management : Writing a 70-1000 word paper on the importance of operations and supply chain management

Write the firms isocost equation and slope of the isocost : Consider a firm using labor and capital as its only inputs. The price of capital is $40 where the price of labor (wage) is $60. Using 500 units of labor and 500 units of capital the firm is producing 1200 units of output. At this mix of input the fir..

Discuss rigorously with detail analysis : Discuss rigorously with detail analysis that, Exact relationship, functional relationship and ceteris paribus clause are the major problems of Econometrics

User Account

All Pages