Question

A cinema charges Rs.80 per ticket and sells 2500 tickets on average. They estimate
that the price elasticity of demand for tickets is (-) 1.6.
Calculate the expected number of tickets sold if they reduce the ticket price to Rs 70.​

Answer 1

Explanation:

Ped = % change in Qty Demanded / % change in Price

% change in price = 12.5%

If Ped = (-) 1.6 then ticket sales will rise by 1.6 x 12.5% = 20%

20% of 250 is 50 extra tickets

Expected tickets sold rises to 300