8 Suppose that adult movie tickets and childrens movie ticke

8) Suppose that adult movie tickets and children\'s movie tickets have the following demand schedules: Price Adu Child Quantity Quantity $2 $4 $6 Demanded Demanded 100 80 60 200 100 50 As the price of movie tickets rises from $4 to $6, what is the price elasticity of demand for (G) adults and (ii) children? (Use the midpoint method in your calculations) (5 points) a. b. Why might the elasticity be different for adults and children? (5 points)

Solution

a). Solution :- Price elasticity of demand = % Change in quantity demanded / % Change in price.

% Change in quantity demanded (for adults) = (80 - 60) / [(80 + 60) / 2]

= 20 / (140 / 2)

= 20 / 70

= 0.2857 i.e., 28.57 %

% Change in price (for adults) = (6 - 4) / [(6 + 4) / 2]

= 2 / (10 / 2)

= 2 / 5

= 0.40 i.e., 40.00 %

Accordingly,  Price elasticity of demand for adults = 28.57 % / 40.00 %

= 0.71425 (Rounded off to 0.71)

% Change in quantity demanded (for children) = (100 - 50) / [(100 + 50) / 2]

= 50 / (150 / 2)

= 50 / 75

= 0.6667 i.e., 66.67 %

% Change in price (for children) = (6 - 4) / [(6 + 4) / 2]

= 2 / (10 / 2)

= 2 / 5

= 0.40 i.e., 40.00 %

Accordingly,  Price elasticity of demand for children = 66.67 % / 40.00 %

= 1.66675 (Rounded off to 1.67)

Conclusion :-

a). i). Price elasticity of demand for adults	0.71
a). ii). Price elasticity of demand for children	1.67