Price Elasticity of Demand Calculation: Movie Theater Ticket Pricing

Elasticity of Demand Explanation

Elasticity of demand measures how responsive the quantity demanded is to a change in price. A higher absolute value of elasticity indicates a greater responsiveness to price changes.

Price Elasticity of Demand Formula

To determine the price the movie theater should charge the general public, we can use the concept of price elasticity of demand formula:

Price elasticity of demand = (Percentage change in quantity demanded) / (Percentage change in price).

Price Calculation Process

Since the elasticity of demand for students is -3 and for the general public it's -2, it means that students are more responsive to price changes.

By using the student's elasticity of demand and the price charged to students ($7.50 per ticket), we can calculate the new price for the general public.

The movie theater should charge the general public $15.00 per ticket based on the elasticity of demand and price change calculation.