In a small town with one movie theater, the demand for movie tickets by young ad
ID: 1177848 • Letter: I
Question
In a small town with one movie theater, the demand for movie tickets by young adults is given by the function Qa = 50 - Pa where Pa is the price of an adult ticket and Qa is the number of young adults attending a movie. For senior citizens, the demand for movie tickets is given by the function Qs= 20 - Ps, where Ps is the price of a senior citizen ticket and Qs is the number of senior citizens attending a movie. The marginal cost of admitting someone to a movie is zero. If the movie theater can use price discrimination and it wants to set prices to maximize their profits, what prices would they charge?
Explanation / Answer
prices for young adult should be 25 and for senoir citizen it should be 10 , to get the max profit. This can be found by maximising functions (50-pa)pa and (20-ps)ps.