Question

1. the price of movie tickets in a town has risen from $7 to $9. which answer choice provides the best explanation for what is the most likely effect of the change in price?

• the quantity demanded for movie tickets will increase as consumers perceive the higher price as an indicator of better quality movies.

• the quantity demanded for movie tickets will decrease as higher prices make them less affordable for consumers, leading some to seek alternative forms of entertainment.

Explanation:

To determine the effect of a price increase from $7 to $9 on movie ticket demand, we use the law of demand (from Economics, a subfield of Business). The law of demand states that, ceteris paribus, as the price of a good rises, the quantity demanded of that good decreases.

• The first option is incorrect because, in general, a price increase for a normal good (like movie tickets, assuming no special quality - signaling context) does not lead to an increase in quantity demanded just due to price - quality perception; this goes against the basic law of demand.
• The second option is correct. A higher price ($9 instead of $7) makes movie tickets less affordable for some consumers. These consumers will then look for other entertainment options (substitutes), which leads to a decrease in the quantity demanded of movie tickets, consistent with the law of demand.

Answer:

The quantity demanded for movie tickets will decrease as higher prices make them less affordable for consumers, leading some to seek alternative forms of entertainment.