Question

2. Famous Cinema Theatres sell the movie tickets for $16 per ticket for evening screenings and sell 250 tickets a night on average. They estimate that the price elasticity of demand for tickets is (negative) 0.8.

Calculate the expected number of tickets sold if they reduce the ticket price to $14

Answer 1

$$Kd=\Delta Q/Q1:\Delta P/P1$$

So,

$$-0.8=Q2-250/250:(14-16)/16$$

In this case the expected quantity is

$$Q2=-0.8*(-1/8)*250+250=275$$

Q2=275 tickets