Your local movie theater earns a total revenue of $40,000 per month when the price of a movie ticket is $8, and it earns a total revenue of $35,000 when the price of a movie ticket is $10. Demand is elastic, inelastic, or unitary elastic?

Inelastic

Explanation:

Elasticity of demand = percentage change in quantity demanded / percentage change in price

percentage change in quantity demanded =

35,000 - 40,000/40,000 = - 0.125 = - 12.5%

percentage change in price = $10 - $8 / $8 = 0.25 = 25%

Elasticity = - 12.5%/25% = - 0.5

Demand is inelastic because the elasticity of demand is a less than 1.

Elasticity of demand measures how quantity demanded changes when price change.

Demand is inelastic when a change in price has no effect on quantity demanded. Inelastic demand has a value of less than 1.

Demand is elastic if a change in price has an effect on quantity demanded. Elastic demand has a value of more 1

Unitary elastic is when a change in price has the same proportional effect on a change in quantity demanded. Unitary elastic demand has a value of 1.