Question 5.2
2. At the present level of consumption, 4,000 movie tickets, and at the current price, $5 per ticket, the price elasticity of demand for movie tickets is 1. Using the midpoint method, calculate the percentage by which the owners of movie theaters must reduce price in order to sell 5,000 tickets.
By the midpoint method, the percent change in the quantity of movie tickets demanded in going from 4,000 tickets to 5,000 tickets is
Since the price elasticity of demand is 1 at the current consumption level, it will take a 22% reduction in the price of movie tickets to generate a 22% increase in quantity demanded.