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

The price elasticity of demand is -1.81.

Step-by-step 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

=
`(Change\ in\ quantity\ demanded)/(Change\ in\ price)`

=
`((Q2-Q1)/(Q1) )/((P2-P1)/(P1) )`

=
`((300-250)/(250) )/((8-9)/(9) )`

=
`((50)/(250) )/((-1)/(9) )`

=
`(0.2)/(-0.11)`

= -1.81