Movie attendance dropped 8 percent as ticket prices rose a little more than 5 percent. What is the price elasticity of demand for movie tickets. Could price elasticity be somewhat overestimated from these figures? That is, could other things have changed, accounting for some of the decline in attendance?
Thank you
Different movie would change results!
.08/.05 = 1.6
To determine the price elasticity of demand for movie tickets, we need to calculate the percentage change in quantity demanded (attendance) and the percentage change in price.
The percentage change in quantity demanded can be calculated using the formula:
Percentage change in quantity demanded = (new quantity - initial quantity) / initial quantity * 100
In this case, the attendance dropped by 8 percent, so the percentage change in quantity demanded is -8%.
The percentage change in price can be calculated using the formula:
Percentage change in price = (new price - initial price) / initial price * 100
Here, it is mentioned that the ticket prices rose a little more than 5 percent, so let's assume a 5.5% change in price.
Now, the price elasticity of demand can be calculated using the formula:
Price Elasticity of Demand = (Percentage change in quantity demanded) / (Percentage change in price)
Substituting the values,
Price Elasticity of Demand = -8% / 5.5%
Now to answer the second part of your question, whether the price elasticity could be somewhat overestimated from these figures, it is possible. This is because there could be other factors affecting the decline in attendance. For example, changes in consumer preferences, competing forms of entertainment, economic conditions, or marketing strategies could all contribute to the decline in attendance.
To accurately determine the true price elasticity of demand, it is necessary to consider and account for these other factors and conduct a more comprehensive analysis.