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pantera1 [17]
3 years ago
14

Suppose that when the price of a movie ticket is $4, 100 people attend the matinee. If the price is increased to $5, suppose tha

t only 50 people attend the matinee. Using the midpoint method in numeral form, the absolute value of the price elasticity of demand is _____.
Business
1 answer:
erik [133]3 years ago
6 0

Answer:

<u>3</u>

Explanation:

Price elasticity of demand refers to degree of responsiveness of quantity demanded to a change in price.

Price elasticity of demand is calculated as;

average price = \frac{5\ +\ 4}{2} = $4.5

Average quantity = \frac{100\ +\ 50}{2} = 75

Elasticity of demand (E_{d}) is given by \frac{change\ in\ quantity}{average\ quantity}  ÷ \frac{change\ in\ price}{average\ price}

= \frac{100\ -\ 50}{75} ÷ \frac{5\ -\ 4}{4.5}

= 3

Thus absolute value (ignoring the negative sign of change in prices) of price elasticity of demand is 3.

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