Question

Question 111 pts

There was a recent article on ESPN.com about prices changing for food and drinks at Atlanta Falcons Football games. The article notes that, “although food and beverage prices were 50 percent lower in its new Mercedes-Benz Stadium than the prices in the Georgia Dome the previous year, fans spent 16 percent more.” Based on this information, what is your best estimate for the elasticity of demand for food and drinks at Atlanta Falcons games.

(Hint: If it's helpful you can assume that, before the change, the price of food was $1 and the quantity sold was 100.)

Group of answer choices

(a) -4.6

(b) -3.1

(c) -2.6

(d) -0.4

(e) -0.3

Answer 1

Answer to question is option (c) -2.6

Initial total expenditure = $1*100 = $100

New expenditure = 16% more than initial expenditure = 100(1.16) = $116

Initial price = $1 and New price = $0.5

Initial demand = 100 and New demand = new total expenditure/new price , that is , New demand = 116/0.5 = 232

Price elasticity of demand = [(∆Q/∆P)*(P/Q)]

∆Q = 232-100 = 132

∆P = $0.5-$1 = - $0.5

P = $1 and Q = 100

Therefore ,

Price elasticity of demand = [(132/-0.5)*(1/100)] = -2.6