Question

To conduct an experiment, AMC increased movie ticket prices from $9.00 to $10.00 and measured the change in ticket sales. Using the data over the following month, they concluded that the increase was profitable. However, over the subsequent months, they changed their minds and discontinued the experiment. How did the timing (of the project discontinuance) affect their conclusion about the profitability of increasing prices?

Answer 1

In the short-run,price elasticity is lower meaning that the demand won't get affected with respect to increase in prices in the short-run and people continued buying tickets which increased the revenue.In the long-run, elasticity was high and people tastes and preferences change or they find another seller with cheaper price and they won't be willing to pay higher price so they reduced their demand and which decreased the profits of AMC and they discontinued the experiment.