1. Movie tickets prices increased by 5% and resulted in a 8% drop in sales. What is the price elasticity of demand?
2. If ticket prices decreased by 5% instead of raising them, what would the changes in attendance would you expect?
3. If a competing cinema reduced its prices by 10%, how would that affect demand at your cinema?
Using the formula E=%Chg in Q / %Chg in P
I think the first answer is E= -8/5 = -1.6 and the second answer is -1.6=Chg in Q / -5 which makes Q=8. Please correct me if I am wrong. The 3rd question has me stuck, do I base the demand at my cinema off the -1.6?