1. Suppose that, in a bold move, the owners of the movie theater in Moscow decide to raise the price of general admission movie tickets from $7 to $9. Afterwards, they notice that the weekly quantity demanded of tickets among those under 30 years of age dropped from 1200 to 800, and the quantity demanded among those ages 30 to 60 (those at the peak of life) dropped from 1050 to 950.
a. Calculate the price elasticity of demand for those under 30 years old. Then calculate the price elasticity of demand for those aged 30 to 60. (Note: in each case, the price change is the same).
b. Based on part a, how would you characterize demand for each group of movie fans? Explain (briefly) why the elasticities might differ.
2. Consider the following two equations from the Moscow Clydesdale market (as in Assignment 1):
Demand: P = 2000 - 50QD
Supply: P = 400 + 30QS
a. Suppose that this market is not well established, so sellers decide to offer these beasts for sale at a price of $1150. Use the equations to determine what the market outcome will be.
b. Sketch a brief graph that shows the situation depicted in part a. Be sure to label your graph.
c. What do you expect will happen next in this market, based on the outcome found in part a?