Quantity Demanded Question and Answer 2022

Answer 1
Part a
The cinema can engage in price discrimination which means the seller can sell the same
product at various prices to different buyers for maximising sales and profits. Price
discrimination is a strategy of selling goods where the sellers are known to charge customers
various prices for the similar products. In this case, the cinema can engage in price
discrimination. It can sell the tickets at a higher price to the adult buyers and can give
concession to the students. The students however needs to show identity card for buying the
tickets. Therefore, in this way the ticket seller can maximize its profit and maximize its
revenue by charging high from the adult buyers and given concessions to the students.
Part b
Adult Buyers
Price
Quantit
y
Demand
ed TR TC Profit
20 0 0 0 0
18 2 36 12 24
16 4 64 24 40
14 6 84 36 48
12 8 96 48 48
10 10 100 60 40
8 12 96 72 24
From the above table it have been found out that the maximum profit is 48 which took place
when the price is either 12 or 14. As profit is calculated by differencing the total revenue and
total cost, it can be said that the maximum profit took place when the price is either 12 or 14.

Part c
Pric
e
Quantity
Demande
d
Total
reven
ue
total
cost profit
12 0 0 0 0
10 1 10 6 4
8 2 16 12 4
6 3 18 18 0
4 4 16 24 -8
2 5 10 30 -20
From the above table as the maximum profit is 4, the seller should be charging 10 in order to
achieve maximum profit.
Answer 2
Good Own Price Elasticity of Demand
Cigarettes -0.40
Alcohol -1.00
Sugary Drinks -1.30
Part a
In order to increase tax revenue, the government should be taxing cigarettes since it has the
negative price elasticity. The negative price elasticity states that people will be buying similar
quantity of products whether price increases or decreases. Therefore, when the government
will be imposing taxes on cigarettes, the price will rice but the demand will not reduce which
will increase the revenue.
Part b

Alcohol has the elastic demand since its own price elasticity is -1.00.
Part c
When the government wants to decrease the consumption by 10 percent, he should be
imposing 25 percent tax
Part d
The government should be imposing 35 percent tax in order to decrease the consumption by
30 percent.
Part e
In order to reduce the consumption of sugary drinks, the government should be imposing a
tax of 15 percent.
Answer 3
Part a
The below diagram shows the market equilibrium for ice cream. The demand curve is shown
by D and the supply curve is shown by S. The equilibrium point is E which is at the point of
intersection of the demand curve and supply curve. The price of ice cream is marked at P and
the quantity is marked at Q.
Part b