The price of a good increases from $75 to $100. Sales decrease from 1000 to 800.
a. Find price elasticity of ticket demand at these prices and quantities.
b. with the same elasticity calculated above, if price decreases from $75 to $50, what would be the new quantity demanded?
A)Price elasticity of demand= % change in quantity demanded÷ % change in price
% change in quantity demanded
=( 800-1000)÷ 1000
= -0.2 or -20%
% change in price
=( 100-75)÷ 75
= 0.333 or 33.33%
Price elasticity of demand= -20% ÷ 33% = -0.60
B) Quantity demanded=
Price elasticity of demand= % change in quantity demanded÷ % change in price
-0.60 = % change in quantity demanded÷ - 33.33%
% change in quantity demanded= 0.60 × 0.33= 0.20 or 20 %
Hence change in quantity demanded= 20%
% change in price =( 50-75) ÷ 75 = - 0.3333 or -33.33%
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