Answer to Question #216566 in Economics for Paballo

Question

If the owners of Ster Kinekor move theatres discounted the price of admission fees by 30 per cent, average attendance would rise by 50 per cent. Based on this data, it could be concluded that the price elasticity of demand for move tickets is

A. perfectly elastic.
B. unitary elastic.
C. elastic.
D. inelastic

Answer 1

By the definition of price elasticity of demand, we have:

$$E_d=\dfrac{\%\Delta Q}{\%\Delta P}=\dfrac{50\%}{30\%}=1.67.$$

Since $E_d>1$ the price elasticity of demand is elastic. Therefore, the correct answer is (C) elastic.