Question

It has been estimated that the price elasticity of demand for attending baseball games is 0.23. Other things held constant, a 10 percent increase in attendance can be explained by a:

(A) 43.48 percent rise in the price of a ticket.
(B) 23 percent fall in the price of a ticket.
(C) 23 percent rise in the price of a ticket.
(D) 43.48 percent fall in the price of a ticket.

Answer 1

(D) 43.48 percent fall in the price of a ticket.

Step-by-step explanation:

Price Elasticity of demand measure the responsiveness of demand to change in the price of a product. It calculates the ratio of change in demand and change in price.

Price elasticity of demand = % change in demand / % change in price

0.23 = 10% / % change in price

% change in price = 0.1 / 0.23

% change in price = 0.4348 = 43.48%

Fall in price will increase the attendance in the game.