he CEO of Globe Movie Theatre Limited has hired you as a consultant to advise on the ticket-pricing strategy. As a basis of your recommendations, you consider the historical ticket-sales data which seems to suggest the following ticket-sales elasticities: Own-price elasticity = -0.05 Refreshment price elasticity = -0.12 Nairobi population elasticity = +0.67 Advertising elasticity = +0.70 i)The CEO is contemplating a moderate increase in ticket prices in order to increase revenue. Explain whether this is a good idea. ii)The CEO is contemplating a moderate increase in the advertising budget in order to increase revenue. Is this a good idea? Explain. If the population of Nairobi increased from 2million to 2.2million in the next one year, what would be the resulting impact on ticket demand? Assume all other factors are held constant.
he CEO of Globe Movie Theatre Limited has hired you as a consultant to advise on the ticket-pricing strategy. As a basis of your recommendations, you consider the historical ticket-sales data which seems to suggest the following ticket-sales elasticities: Own-price elasticity = -0.05 Refreshment price elasticity = -0.12 Nairobi population elasticity = +0.67 Advertising elasticity = +0.70 i)The CEO is contemplating a moderate increase in ticket prices in order to increase revenue. Explain whether this is a good idea. ii)The CEO is contemplating a moderate increase in the advertising budget in order to increase revenue. Is this a good idea? Explain. If the population of Nairobi increased from 2million to 2.2million in the next one year, what would be the resulting impact on ticket demand? Assume all other factors are held constant.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- a)The CEO of Globe Movie Theatre Limited has hired you as a consultant to advise on the ticket-pricing strategy. As a basis of your recommendations, you consider the historical ticket-sales data which seems to suggest the following ticket-sales elasticities:
Own-
Refreshment price elasticity = -0.12
Nairobi population elasticity = +0.67
Advertising elasticity = +0.70
- i)The CEO is contemplating a moderate increase in ticket prices in order to increase revenue. Explain whether this is a good idea.
- ii)The CEO is contemplating a moderate increase in the advertising budget in order to increase revenue. Is this a good idea? Explain.
If the population of Nairobi increased from 2million to 2.2million in the next one year, what would be the resulting impact on ticket demand? Assume all other factors are held constant.
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