Concession prices at movie theaters is a frequent topic of discussion between moviegoers. One typical example...

  

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Concession prices at movie theaters is a frequent topic of discussion between moviegoers. One typical example is the price of popcorn at movie theaters. To make this question more concrete, consider the price of a large bucket of popcorn at AMC theaters: $9.00. It is possible to purchase the same amount of popcorn at a super market chain for half the price: $4.50. a. Movie theaters typically don't let moviegoers bring food into theaters. But many moviegoers enjoy eating popcorn and sipping soda when watching their favorite movie. Considering these two facts, is the demand for popcorn at movie theaters price elastic or inelastic? (In terms of economics, does the quantity demanded for popcorn decrease more than 1% when the movie theater increases the price of popcorn by 1 %?) (5 pts) b. Outside the movie theater there are many alternative places where popcorn can be purchased. Consider the price of popcorn at the super market chain, QFC. Suppose QFC would like to do the same thing as AMC theaters and charge $9.00 for popcorn. What would happen to quantity demanded for popcorn at QFC? Is the demand for popcorn at a super market price elastic or inelastic? (5 pts) c. What happens to AMC theaters' revenue from selling popcorn if they increase the price of popcorn by 1 %? Does their revenue increase or decrease? (Recall revenue is equal to price times quantity sold.) If their revenue increases in this case, can AMC keep on increasing the price of popcorn forever to increase their revenue? (Hint: The price elasticity of demand is not the same at all points along the demand curve.) (10 pts) d. What happens to QFC's revenue from selling popcorn if they increase the price of popcorn by 1%? Does their revenue increase or decrease? (5 pts) NOTE: In the upcoming weeks, you will learn price discrimination (such as charging different prices for business and economy class seats on a flight), different degrees of price discrimination and bundling (such as selling soda and popcorn together for a discounted price at a movie theater). We will come back to this question after we cover those topics of microeconomics. Concession prices at movie theaters is a frequent topic of discussion between moviegoers. One typical example is the price of popcorn at movie theaters. To make this question more concrete, consider the price of a large bucket of popcorn at AMC theaters: $9.00. It is possible to purchase the same amount of popcorn at a super market chain for half the price: $4.50. a. Movie theaters typically don't let moviegoers bring food into theaters. But many moviegoers enjoy eating popcorn and sipping soda when watching their favorite movie. Considering these two facts, is the demand for popcorn at movie theaters price elastic or inelastic? (In terms of economics, does the quantity demanded for popcorn decrease more than 1% when the movie theater increases the price of popcorn by 1 %?) (5 pts) b. Outside the movie theater there are many alternative places where popcorn can be purchased. Consider the price of popcorn at the super market chain, QFC. Suppose QFC would like to do the same thing as AMC theaters and charge $9.00 for popcorn. What would happen to quantity demanded for popcorn at QFC? Is the demand for popcorn at a super market price elastic or inelastic? (5 pts) c. What happens to AMC theaters' revenue from selling popcorn if they increase the price of popcorn by 1 %? Does their revenue increase or decrease? (Recall revenue is equal to price times quantity sold.) If their revenue increases in this case, can AMC keep on increasing the price of popcorn forever to increase their revenue? (Hint: The price elasticity of demand is not the same at all points along the demand curve.) (10 pts) d. What happens to QFC's revenue from selling popcorn if they increase the price of popcorn by 1%? Does their revenue increase or decrease? (5 pts) NOTE: In the upcoming weeks, you will learn price discrimination (such as charging different prices for business and economy class seats on a flight), different degrees of price discrimination and bundling (such as selling soda and popcorn together for a discounted price at a movie theater). We will come back to this question after we cover those topics of microeconomics.

Answer rating: 100% (QA)

a The demand for PopCorns at AMC is clearly inelastic in nature This is clearly ... View the full answer