Price Elasticity of demand measures the percentage change in quantity demanded of a good or service due to a percentage change in the price of a good or service.
Using Midpoint Method to find Elasticity of Demand
Ed = [(Q2 -Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2]
where P is Price and Q is the quantity
Q1 = 49000, Q2 = 44000, P1 = 18, P2 = 22
Ed = [(44000 - 49000) / (44000 + 49000) / 2] / [(22 - 18) / (22 + 18) / 2]
Ed = [(5000 / (93000 / 2)] / [( 4 / (40 / 2)]
= (5000 / 46,500) / (4 / 20)
= 0.1075 / 0.2
= 0.54
While calculating the price elasticity of demand, only absolute values are considered, and the minus sign is ignored.
Price Elasticity of Demand for bleacher seats at Clubs Games = 0.54
As the Price Elasticity of Demand is less than 1, it means that demand for bleacher seats at Clubs Games is Inelastic. In the case of Inelastic demand, a given percentage change in price results in a relatively lesser percentage change in quantity demanded.
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