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Various studies have concluded that the demand for movie cinema attendance is responsive to advertising. A study of one company, with movie cinemas in three neighbouring towns, shows that the quantity demanded each month in each town was related to the advertising budget in that town in the manner shown in the table below. A movie ticket costs the same amount, 7.50, in each of the three towns.
The company is considering an advertising budget of $7,500 per month. What advertising mixes should the company adopt in order to generate the largest increase in its revenue? Explain the economic principle you rely on in order to reach your conclusion, and what unique condition is fulfilled when the largest increase in revenue is attained?
Why do demand curves generally slope downward? The demand curve slopes downward because in general, the higher the price of the good, the fewer people will need to buy it.
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