. 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 form these figures? That is, could other things have changed, accounting for some of the decline in attendance?
To calculate the price elasticity of demand for movie tickets, we need the percentage change in quantity demanded and the percentage change in price. In this case, the quantity demanded dropped by 8 percent and the price increased by a little more than 5 percent.
The formula for price elasticity of demand is:
Elasticity = (Percentage change in quantity demanded) / (Percentage change in price)
In this case, the percentage change in quantity demanded is -8% (-0.08) and the percentage change in price is 5% (0.05). Plugging these values into the formula, we get:
Elasticity = (-0.08) / (0.05)
Elasticity ≈ -1.6
The price elasticity of demand for movie tickets is approximately -1.6. This means that a 1% increase in price would result in a 1.6% decrease in quantity demanded.
However, it's important to consider that other factors could have contributed to the decline in attendance, potentially leading to an overestimation of price elasticity. For example, changes in consumer preferences, competition from other forms of entertainment, economic conditions, or external events could also affect demand for movie tickets.
To determine whether other factors have influenced the decline in attendance, one would need to conduct a more comprehensive analysis considering all potential causes and their respective impacts. Simple percentage changes in attendance and ticket prices do not account for these additional factors.