Question

Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes.

a. Three new nightclubs are open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price.

b. The city eliminates a tax that is placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.

Short answer

The original supply and demand curves for movie tickets are depicted in the graph below. The letter "E" denotes price and quantity equilibrium.

Step-by-step solution

Step 1a: Concept

The original supply and demand curves for movie tickets are depicted in the graph below. The letter "E" denotes price and quantity equilibrium.

Step 2a: Explanation

The table below shows how demand varies over time, as well as where new equilibriums have emerged. The new price equilibrium is 86.00, and the new quantity equilibrium is 18.00, as seen in the graph.

Step 3b: Concept

The supply and demand curves after the adjustments are depicted in the graph below. The letter E denotes a new price equilibrium of $6.00 and a new quantity equilibrium of 18 units.

Step 4b: Explanation

The table below shows the new quantities following a 10% increase in supply. The new price equilibrium is $7.00, and the new quantity equilibrium is 22 as shown in the table.

Step 5b: Explanation

After the 10% increase in supply, the graph below illustrates the updated supply and demand curves. The equilibrium is denoted by the letter "E."