Answer questions (a) to (d):

(a)A local cinema increases its ticket price from $20 to $24. The quantity demanded of tickets soon decreases from 1600 to 1200 tickets per week. What is theprice elasticity of demand? Use thepercentage changemethod.(3 marks)

(b)Brieflyexplain

whether this price increase by the cinema in the example above will increase or decrease total revenue. (E_d= %Q / %P).(2 marks)

(c)Assume that a colleague says that the price should permanently be lowered to increase total revenue in a business meeting. How would you respond, knowing that this business sells products that have different price elasticities?(3 marks)

(d)Briefly explain what is meant by "elastic demand" and "inelastic demand". Provide an example for each.(2 marks)