Question

Calculate the price elasticity of demand for the price range of $9 to $10 & $10 to $15 for movie tickets for on D1. Show all work & formulas. Explain if the range is elastic, inelastic, or unit elastic for each demand curve. Tell me if total revenue would rise, fall, or stay the same for the range given.

Answer 1

The price elasticity of demand is used to determine how the price of the movie ticket changes with demand

• The price range of $9 to $10 is inelastic and the total revenue would fall
• The price range of $10 to $15 is inelastic and the total revenue would fall

How to determine the price elasticity of demand

The price elasticity (E) of demand is calculated using:

$E = \frac{(Q_f -Q_i)/(Q_f +Q_i)}{(P_f -P_i)/(P_f +P_i)}$

The question is incomplete, as the change in the quantity demanded is not given.

Assume the change is from 125 to 130 for the price range of $9 to $10.

The equation becomes

$E = \frac{(130 -125)/(130 +125)}{(10 -9)/(10 +9)}$

$E = \frac{(5)/(255)}{(1)/(19)}$

Evaluate

$E = 0.37$

The price elasticity of demand is less than 1.

Hence, the range is inelastic and the total revenue would fall

Using the same range for price range of $10 to $15, we have:

$E = \frac{(130 -125)/(130 +125)}{(15 -10)/(15 +10)}$

$E = \frac{(5)/(255)}{(5)/(25)}$

$E = 0.09$

The price elasticity of demand is less than 1.

Hence, the range is inelastic and the total revenue would fall

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