Question one

Qs = 200 - 4P Qgp = 500 - 5P Graph the two demand curves on one graph. If the current price of tickets is $35, calculate the quantities demanded by students and the general public. Correctly show this information on your diagram (5 marks). ii. Find the price elasticity of demand for each group at the current price and quantities calculated above [ Hint: Use & = and the equations above to calculate elasticity. (3 marks) iii. Based on the calculated elasticities, what will happen to the demand for movie tickets (separately for students and for the general public) when the price per ticket increases by 10%? Is students' demand for tickets elastic or inelastic? Is the general public's demand for tickets elastic or inelastic? (3 marks) iv . Is the University maximizing the revenue generated from movie ticket sales by charging $35 for each ticket? Why or why not? [Hint: It would be useful to establish the connection between price elasticity and total/marginal revenue]