Chapter 1. SP_Chiang_Chapter03_003

Solved Problems
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You must read each slide, and complete any questions on the slide, in sequence.

Suppose that, if the price of movie tickets increases from $10.50 to $11.50, the quantity demanded decreases from 2,541,000 to 2,212,000.

Which is the correct formula for the elasticity of demand?

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_feedback_correct: : Demand elasticity measures the responsiveness of quantity to price. It is represented in terms of “percentage changes,” which is written as “%∆”. _feedback_incorrect: : Demand elasticity measures the responsiveness of quantity to price. It is represented in terms of “percentage changes,” which is written as “%∆”.

For the numerator, how much is %∆Q? Round the answer to two decimal places.
The percentage change formula is 100% * (new value – original value) / original value. Here, we calculate %∆Q =100% * (2,212,000 - 2,541,000)/2,541,000
The percentage change formula is 100% * (new value – original value) / original value. Here, we calculate %∆Q =100% * (2,212,000 - 2,541,000)/2,541,000

For the denominator, how much is %∆P? Round the answer to two decimal places.
Using the percentage change formula, we calculate %∆P = 100% * (11.50-10.50)/10.50.
Using the percentage change formula, we calculate %∆P = 100% * (11.50-10.50)/10.50.

What is the absolute value of the ratio of %∆Q to%∆P? Round the answer to two decimal places.
This is equal to 12.95 divided by 9.52.
This is equal to 12.95 divided by 9.52.

We can conclude that movie-ticket demand is because this elasticity is .

The value of 1.36 is greater than one, but not infinite. It is therefore elastic, but not perfectly elastic.][This text would appear once BOTH answers are selected.
The value of 1.36 is greater than one, but not infinite. It is therefore elastic, but not perfectly elastic.][This text would appear once BOTH answers are selected.