Question

The demand for tickets to an Ethiopian Camparada film is given by D(p)= 200,000-

10,000p, where p is the price of tickets.If the price of tickets is 12 birr, calculate price

elasticity of demand for tickets and draw the demand curve

Answer 1

The price elasticity of demand measures the change in the quantity demanded of a good or service when the price of the product increases or decreases.

$$\varepsilon_D=\dfrac{\%Change\ in \ demand}{\%Change\ in\ price\ unit}$$

$$=\dfrac{\Delta Q/\bar{Q}}{\Delta P/\bar{P}}$$

$$\dfrac{\Delta Q}{\Delta P}=-10000$$

$$D(12)=200000-10000(12)=80000$$

$$\varepsilon_D=-10000(\dfrac{12}{80000})=-1.5$$

Therefore price elasticity of demand is -1.5.

As the price elasticity is negative it implies that as the price of the ticket increases demand will keep on falling.

$$p=20-0.0001q$$