The management of Local Cinema has estimated the monthly demand for tickets to be ln Q = 22,328 − 0.41 ln P + 0.5 ln M − 0.33 ln A + 100 ln P_DVD,where Q = quantity of tickets demanded,P = price per ticket,M = income,A = advertising outlay,and P_DVD = price of a DVD rental.It is known that P = $5.50,M = $9,000,A = $900,and P_DVD = $3.00.Determine the own price elasticity of demand for movie tickets. A) −0.29 B) −0.32 C) −0.39 D) −0.41

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Quizplus · Accepted Answer

The own price elasticity of demand is calculated using the coefficient of the price variable in the demand equation, which is -0.41 in this case. This coefficient directly represents the own price elasticity of demand for movie tickets, indicating that a 1% increase in the price of movie tickets would lead to a 0.41% decrease in the quantity demanded.

The Management of Local Cinema Has Estimated the Monthly Demand