Pricing
Prices help to bring order to markets by communicating to consumers the cost of goods and services and to producers how much they can expect to receive from each sale. In effect, price is the incentive that drives the market.
Why Consumers Buy & Producers Sell!
REAL WORLD EXAMPLES
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Matinee Prices
To encourage customers to take advantage of movies during the afternoon, theaters discount ticket prices for matinees. This makes sense because customers who can attend during matinee times are more flexible, or price elastic. Work and school limit the options that many potential customers have. As a result, theaters discount matinee prices to encourage movie goers who have elastic demand and are willing to watch at less crowded times.
Movie theaters are also willing to discount the price of matinee shows since the films that are shown are rented on a weekly basis. This means that the variable cost of being open during the day is essentially limited to paying a few employees the minimum wage. Thus, the theater can make additional profits if just a few dozen people show up.