Suppose the price of a movie ticket is $7.50 and the quantity demanded is 550. When the increases to $8.50, the quantity demanded drops to 450. Using the mid-point method, what is the price elasticity of demand for movie tickets?
A) 0.625
B) −0.625
C) −1.6
D) 1.6

Question

Quizplus · Accepted Answer

Using the mid-point formula:
Price elasticity of demand = (change in quantity/average quantity)/ (change in price/average price)
= [(450-550)/500]/[(8.5-7.5)/8]
= [-0.2]/[0.125]
= -1.6
Therefore, the price elasticity of demand for movie tickets is -1.6.

Suppose the Price of a Movie Ticket Is $7