Suppose average movie attendance is 250 million tickets when prices are $7 a ticket and 200 million when prices are $9 a ticket. Other things being equal, the data imply that the elasticity of demand for movie tickets is:


A. elastic, so the increase in price caused total revenue to rise.

B. elastic, so the increase in price caused total revenue to fall.

C. inelastic, so the increase in price caused total revenue to rise.

D. inelastic, so the increase in price caused total revenue to fall.

A. elastic, so the increase in price caused total revenue to rise.

To find the elasticity of demand for movie tickets, we can use the midpoint formula. The formula for the midpoint elasticity of demand is:

Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)

First, let’s calculate the percentage change in quantity demanded. The initial quantity demanded is 250 million tickets, and the final quantity demanded is 200 million tickets. The change in quantity demanded is:

ΔQ = Q2 - Q1 = 200 million - 250 million = -50 million

To find the percentage change, we divide the change in quantity demanded by the initial quantity demanded and multiply by 100:

Percentage change in quantity demanded = (ΔQ / Q1) * 100 = (-50 million / 250 million) * 100 = -20%

Next, let’s calculate the percentage change in price. The initial price is $7, and the final price is $9. The change in price is:

ΔP = P2 - P1 = $9 - $7 = $2

To find the percentage change, we divide the change in price by the initial price and multiply by 100:

Percentage change in price = (ΔP / P1) * 100 = ($2 / $7) * 100 ≈ 28.57%

Now we can substitute these values into the elasticity formula:

Elasticity = (-20% / 28.57%) ≈ -0.7

Since the elasticity of demand is negative, we can ignore the negative sign and focus on the absolute value. Based on the magnitude of the elasticity, which is less than 1, we can conclude that the demand for movie tickets is inelastic.

Therefore, the correct answer is C. inelastic, so the increase in price caused total revenue to rise.