A movie theater

Question

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.
Part 2
A.1.55
1.55
B.1.80
1.80
C.0.56
0.56
D.0.65
0.65

Answer 1

To calculate the price elasticity of demand (PED), we use the formula:

PED = (∆Q / ∆P) * (P / Q)

Where:
∆Q = change in quantity demanded
∆P = change in price
P = average price
Q = average quantity demanded

Using the given information, ∆Q = 300 - 250 = 50, ∆P = $8 - $9 = -$1, P = ($8 + $9) / 2 = $8.50, and Q = (250 + 300) / 2 = 275.

Substituting these values into the formula, we get:

PED = (50 / -1) * (8.50 / 275)
= -50 * 0.0309
= -1.545

The absolute value of the price elasticity of demand is 1.545.