When the price of a movie ticket increases from $5 to $7, the quantity of tickets demanded decreases from 600 to 400 a day. What is the price elasticity of demand for movie tickets?
A) 0.83
B) 1.20
C) 1.00
D) 2.32

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). The percentage change in quantity demanded is ((400 - 600) / 600) * 100 = -33.33%. The percentage change in price is ((7 - 5) / 5) * 100 = 40%. Thus, the price elasticity of demand is |-33.33% / 40%| = 0.833, which rounds to 1.20.

When the Price of a Movie Ticket Increases from $5