Question

A movie theater finds that when it prices tickets at ​$9​, the theater sells 250 per day. When the price is reduced to ​$8​, the theater sells 300 per day. Based on this​ information, use the​ average-values formula to find the price elasticity of demand for tickets. Provide the absolute value of the price elasticity of demand.

Answer 1

Answer:

The price elasticity of demand is -1.81.

Explanation:

At price level $9 the quantity demanded is 250.

At the price level $8, the quantity demanded is 300.

The price elasticity of demand will be  

= $\frac{Change\ in\ quantity\ demanded}{Change\ in\ price}$

= $\frac{\frac{Q2-Q1}{Q1} }{\frac{P2-P1}{P1} }$

= $\frac{\frac{300-250}{250} }{\frac{8-9}{9} }$

= $\frac{\frac{50}{250} }{\frac{-1}{9} }$

= $\frac{0.2}{-0.11}$

= -1.81