Question

Marketing Chapter 3 Test Questions

1. A movie theater charges $5 per ticket and averages 300 customers each night. If prices are raised to $7 per ticket, the theater estimates that average nightly ticket sales will be $1,750. What is the percentage change in the average number of customers the theater has each night? (Express your answer in whole numbers; round decimals up or down).      

Answer is 0.17

2. A movie theater charges $5 per ticket and averages 300 customers each night. If prices are raised to $7 per ticket, the theater estimates that average nightly ticket sales will be $1,750. What is the percentage change in ticket prices?

Answer is 0.40


3. A movie theater charges $5 per ticket and averages 300 customers each night. If prices are raised to $7 per ticket, the theater estimates that average nightly ticket sales will be $1,750. What is the elasticity of demand in this situation? (Hint: Elasticity of demand is determined by calculating the ratio of the percentage change in the quantity demanded over the percentage change in price.)

Answer is 0.425


4. Study the following data for a product:

Price Amount produced Amount demanded
$200 100,000 7,000
$100 80,000 35,000
$75 45,000 45,000
$50 30,000 70,000
$20 15,000 90,000

Find the market price. ________?  Answer is $75

Answer 1

Step-by-step explanation:

1.) The average nightly ticket sales can be calculated as

Average sales = Average no. of customers per night x Charge per ticket

For the second night, we have

$1750 = (N)($7)

This gives us N = 250.

So, the average number of customers decreased as a result of the price increase.

To calculate the percentage change, we use the following formula:

% change = $\frac{250 -300}{300} X 100$

We have -17% change in the average number of customers the theater has each night. The negative sign indicates a decrease in the number, which is consistent with our calculations.

2.) % change in prices = $\frac{Final price - Initial price}{Initial price} X100$

Therefore, we have 40% change in the cost of ticket per person, which reflects an increase in the prices.

3.) Elasticity of Demand = $\frac{ percentage change in quantity demanded}{percentage change in price}$

Hence, we have $\frac{-17}{40}$ = -0.425

This stands consistent with the Law of Demand - as the price increases, the quantity demanded decreases.

4.) Market price is obtained by looking for a point where the quantity supplied equals the quantity demanded. From the table we see that at $75 price, there is a demand for 45,000 units of that product in that market, which the suppliers are willing to supply. Hence, that defines the market price for that product.