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Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies? (Use Arc Elasticity Method)
- a)0.1
- b)- 0.5
- c)0.7
- d)1.2
Correct answer is option 'B'. Can you explain this answer?
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Verified Answer
Suppose the price of movies seen at a theatre rises from Rs. 120 per p...
Price elasticity of demand (PED) is calculated using the formula:
PED = % change in quantity demanded / % change in price
In this case, the % change in quantity demanded is calculated as:
% change in quantity demanded = (new quantity demanded - old quantity demanded) / old quantity demanded
% change in quantity demanded = (200 - 300) / 300 = -0.3333
The % change in price is calculated as:
% change in price = (new price - old price) / old price
% change in price = (200 - 120) / 120 = 0.6667
Now, we can substitute the values into the PED formula:
PED = -0.3333 / 0.6667
PED ≈ -0.5
The price elasticity of demand for movies is approximately -0.5.
PED = % change in quantity demanded / % change in price
In this case, the % change in quantity demanded is calculated as:
% change in quantity demanded = (new quantity demanded - old quantity demanded) / old quantity demanded
% change in quantity demanded = (200 - 300) / 300 = -0.3333
The % change in price is calculated as:
% change in price = (new price - old price) / old price
% change in price = (200 - 120) / 120 = 0.6667
Now, we can substitute the values into the PED formula:
PED = -0.3333 / 0.6667
PED ≈ -0.5
The price elasticity of demand for movies is approximately -0.5.
Most Upvoted Answer
Suppose the price of movies seen at a theatre rises from Rs. 120 per p...
Given data:
Initial price (P1) = Rs. 120 per person
New price (P2) = Rs. 200 per person
Initial attendance (Q1) = 300 persons
New attendance (Q2) = 200 persons
To calculate price elasticity of demand, we use the formula:
Price elasticity of demand = (Percentage change in quantity demanded)/ (Percentage change in price)
Calculation:
Percentage change in quantity demanded = ((Q2-Q1)/Q1) * 100
= ((200-300)/300) * 100
= -33.33%
Percentage change in price = ((P2-P1)/P1) * 100
= ((200-120)/120) * 100
= 66.67%
Price elasticity of demand = (-33.33/66.67)
= -0.5
The negative sign indicates that the demand for movies is elastic, which means that a change in price leads to a proportionate change in the quantity demanded.
To convert the elasticity value to a positive number, we take the absolute value, which is 0.5.
Therefore, the price elasticity of demand for movies is 0.5 or 0.8 (rounded off to one decimal place), which is option (b).
Initial price (P1) = Rs. 120 per person
New price (P2) = Rs. 200 per person
Initial attendance (Q1) = 300 persons
New attendance (Q2) = 200 persons
To calculate price elasticity of demand, we use the formula:
Price elasticity of demand = (Percentage change in quantity demanded)/ (Percentage change in price)
Calculation:
Percentage change in quantity demanded = ((Q2-Q1)/Q1) * 100
= ((200-300)/300) * 100
= -33.33%
Percentage change in price = ((P2-P1)/P1) * 100
= ((200-120)/120) * 100
= 66.67%
Price elasticity of demand = (-33.33/66.67)
= -0.5
The negative sign indicates that the demand for movies is elastic, which means that a change in price leads to a proportionate change in the quantity demanded.
To convert the elasticity value to a positive number, we take the absolute value, which is 0.5.
Therefore, the price elasticity of demand for movies is 0.5 or 0.8 (rounded off to one decimal place), which is option (b).
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Community Answer
Suppose the price of movies seen at a theatre rises from Rs. 120 per p...
Use point elasticity then you can get correct answer
But the correct method is to use arc elasticity as per ICAI
Already I have reported this question.
But the correct method is to use arc elasticity as per ICAI
Already I have reported this question.
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Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies?(Use Arc Elasticity Method)a)0.1b)- 0.5c)0.7d)1.2Correct answer is option 'B'. Can you explain this answer?
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Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies?(Use Arc Elasticity Method)a)0.1b)- 0.5c)0.7d)1.2Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies?(Use Arc Elasticity Method)a)0.1b)- 0.5c)0.7d)1.2Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Suppose the price of movies seen at a theatre rises from Rs. 120 per person to Rs. 200 per person. The theater manager observes that the rise in price is because attendance at a given movie is to fall from 300 persons to 200 persons. What is the price elasticity of demand for movies?(Use Arc Elasticity Method)a)0.1b)- 0.5c)0.7d)1.2Correct answer is option 'B'. Can you explain this answer?.
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