Assume that the price elasticity of demand for movie theatres is -.85 during all

Question

Assume that the price elasticity of demand for movie theatres is -.85 during all evening shows but for all afternoon shows the price elasticity of demand is -2.28. For the theatre to maximize total revenue, it should

a) Charge the same price for both shows, holding other things constant.

b) Charge a higher price for the afternoon shows and lower price for the evening shows, holding other things constant

c) Charge a lower price for the afternoon shows and higher price for the evening shows, holding other things constant

d) Need more information

confused, please explain why its the correct answer, thanks!

Explanation / Answer

c) Charge a lower price for the afternoon shows and higher price for the evening shows, holding other things constant

Reason

Since the afternoon has a relatively elastic demand as compared to the evening shows, charging higher price will lead to a much lesser demand in the afternoon show than the evening one, so it should have lower price in the afternoon shows,

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