Question

You are the duty manager of the only cinema in town and have noticed that you get more customers from Thursday through to Sunday nights than for you do on Monday through Wednesday. You are also studying Business at university so you decide to investigate further and have determined that each period can be represented by two different markets demand curves. The busier weekends seem to follow an inverse demand curve of P = 10−0.001Q, while the weekdays it is P = 5−0.01Q. The marginal cost of adding another customer to the cinema is $0.50 and on average your customer never see more than one movie per week. You mention this to your boss and she decides ask for your expert advice:

(a) Calculate what pricing strategy would maximise her profits?

(b) Describe what would happen if you could convince the average customer to see more than one movie a week?

Answer 1