The price elasticity of demand for movies is approximately 1 and 500,000 tickets are sold per day. If the average price of a movie ticket increases by 20 percent, the number of tickets sold each day decreases to
A) 400,000.
B) 300,000.
C) 420,000.
D) 475,000.

Question

Quizplus · Accepted Answer

Price elasticity of demand of 1 indicates unitary elasticity, meaning a 20% increase in price will lead to a 20% decrease in quantity demanded. Therefore, 20% of 500,000 is 100,000, so the new quantity is 500,000 - 100,000 = 400,000 tickets.

The Price Elasticity of Demand for Movies Is Approximately 1