Question

Homework: Homework 1 - Chapter 2 Score: 0 ol 1 pt Concept Question 4.1 12 of 15 (11 c HYy Score: 5667%, 8 5 of 15 EQuestion Help A minor league baseball team raised the average price of its tickets from $8 to $8 60 and found that average attendance at its answer as a real number rounded to two decimal places. Don forgel the negative sign) 1 part

Answer 1

Ans.) Price elasticity of demand measures the responsiveness of the change in quanity demanded to the change in price.

The Arc elasticity is calculated using the mid-point of the variables - Quantity and Price as it eliminates the problem of direction in calculating the elasticity of demand.

Mathematically,

Arc Elasticity = (change in quantity/ Mid- point of quantity) ÷ (change in price/Mid- point of price)

Price increases from $8 to $8.6

Change in Price = $0.6

Mid point of price = $8.3

Demand decreases from 5200 to 4700

Change in demand = - 500

Mid point quantity = 4950

Substituting above values in the formula:

= ( -500/4950) ÷ (0.6/8.3)

Arc Elasticity = - 1.40