At the present level of consumption, 4,000 movie tickets, and at the current price, $5

Chapter 0, Problem 3

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QUESTION:

At the present level of consumption, 4,000 movie tickets, and at the current price, $5 per ticket, the price elasticity of demand for movie tickets is 1. Using the midpoint method, calculate the percentage by which the owners of movie theaters must reduce the price in order to sell 5,000 tickets.

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QUESTION:

At the present level of consumption, 4,000 movie tickets, and at the current price, $5 per ticket, the price elasticity of demand for movie tickets is 1. Using the midpoint method, calculate the percentage by which the owners of movie theaters must reduce the price in order to sell 5,000 tickets.

ANSWER:

Step 1 of 2

The price elasticity of demand is a measure of the change in the quantity of good demanded due to change in price.  It will be negative for normal goods and positive for Giffen goods.

The price elasticity can be calculated by midpoint formula as:

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