Use the following hypothetical demand schedule for movies:
Quantity Demanded Price Elasticity
100 $5
80 $10
60 $15
40 $20
20 $25
10 $30
a. Determine the price elasticity of demand at each quantity demanded using the arc or midpoint formula:
Percentage change in quantity demanded _(Q2 _ Q1)/Q1 divided by percentage change in price _ (P2 _ P1)/P1.
b. Redo exercise 1a using price changes of $10 rather than $5. What would a 10 percent increase in the price of movie tickets mean for the quantity demanded of a movie theater if the price elasticity of demand was 0.1, 0.5, 1.0, and 5.0?