1. Predict the elasticity of demandfor feature movies that is described by each

Question

1.      Predict the elasticity of demandfor feature movies that is described by each of the followingstatements. [Justify your answers.] (2 marks each)

a.      We go to the movies two Fridaysout of every month, without exception.

b.      When the price of movies went upto $7, we quit going to movies on Friday nights. We now wait for$3.50 Tuesday before we see a movie.

c.      We budget $30 a month for movies.Thus, if the price of movies goes up, we’ll have to takeaction so as to stay within our budget.

Explanation / Answer

inelasticbecause the demand will not change with price
b.      When theprice of movies went up to $7, we quit going to movies on Fridaynights. We now wait for $3.50 Tuesday before we see amovie. some what elasticbecause price with change demand put they still see same amount ofmovies
c.      We budget $30 a month formovies. Thus, if the price of movies goes up, we’ll have totake action so as to stay within our budget. elastic becauseprice determents numbers of movies seen eachmonth

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