Question

2) Concert ticket prices hit new high note E t2 msi USA Today, July 10, 2001 www.usatoday.com O2 A m to 0921n 29rtl-lliMmasp2 sol It costs a lot more to see your favorite band in person, and there seems to be no end in sight to the skyrocketing ticket costs. The average ticket price during the first six months of 2001 was $46.69, a 4.2% jump from the same period last year, according to a report released Monday by the concert trade publication Pollstar. In the past four years, concert ticket prices have nearly doubled. The report suggests concertgoers have finally had enough: Ticket sales were down 15.5 % this year vs. the first six months of 2000. a) What is the implied price elasticity of demand for concert tickets? b) Is this inelastic, unit elastic, or elastic? How do you interpret this finding?

Answer 1

2.a) Price elasticity of demand is the ratio of percentage change in quantity demanded of the good to percentage change in price of the good. Here price elasticity of demand = 15.5%/4.2%= 3.69. Hence the price elasticity of demand is 3.69.

2.b) Since the elasticity is greater than 1 it is elastic. Due to price change there was more than proportionate decline in demand for tickets. It shows that consumers are responsive to price changes and if price increases there will be more than proportionate decline demand for tickets.