Question

Ticket prices to a Kanye West concert increase from $40 to $60. As a result, ticket sales decrease from 50,000 to 40,000. The elasticity of demand for Kanye West tickets equals ________ and demand is ________.

Answer 1

Answer:

.4

Inelastic

Explanation:

Elasticity of Demand = |%Change in Demand / %Change in Price|

%Change in Demand= |(40,000 - 50,000)/50,000| =  20%

%Change in Price = |(60 - 40)/40| = 50%

Elasticity of Demand = .2/.5 = .4 or 40%

.4 < 1 so Demand is Inelastic