If the price of a movie ticket increases by 4 percent and the quantity of movies demanded falls by 2 percent, the price elasticity of demand is
A) 2.0.
B) 4.0.
C) 0.5.
D) some amount that cannot be determined without more information.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, it is -2% / 4% = -0.5. The negative sign indicates that the relationship between price and quantity demanded is inverse, which is typical for demand elasticity.

If the Price of a Movie Ticket Increases by 4