Let Ed_t= -2.This implies that the demand for movie tickets is A)inelastic,because a 1 percent change in P_tchanges Qd_t by 2 units. B)inelastic,because a 1 percent change in P_tchanges Qd_t by 1 percent. C)elastic,because a 1 percent change in P_tchanges Qd_t by 1 percent. D)elastic,because a 1 percent change in P_tchanges Qd_t by 2 percent.

Question

Quizplus · Accepted Answer

The correct answer is D because elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. A coefficient greater than 1 (absolute value) indicates elasticity, meaning the quantity demanded changes by a greater percentage than the price does. In this case, a 1 percent change in price leads to a 2 percent change in quantity demanded, indicating elasticity.

Let Edt = -2

Let Ed_t= -2