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Calculating price elasticity of demand

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Suppose that families with children ages 6-12 years old and families with children ages 15-21 years old have the following demand for tickets to Disney World. (10 points)

Quantity Demanded/Week Quantity Demanded/Week
Price per Ticket (families with 6-12 year olds) (families with 15-21 year olds)
$ 50 3,100 1,000
75 2,900 700
100 2,600 500
125 2,400 400

? Calculate the price elasticity of demand for: (i) families with 6-12 year old children and; (ii) families with 15-21 year old children as the price per ticket rises from $50 to $75, and then increases from $75 to $100. Compute the simple average of these two elasticity estimates such that you have an average elasticity estimate for families with children ages 6-12 and families with children ages 15-21.
? Whose demand is more price sensitive, families with children ages 6-12 years old, or those with children ages 15-21 years old? Why do you think this is the case?
? Suppose that Disney know which group's demand is the more price inelastic. How does this knowledge influence Disney's decisions on pricing tickets to Disney World?

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The solution describes the steps to calculate price elasticity of demand. The quantity demanded and weeks are determined.

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? Calculate the price elasticity of demand for: (i) families with 6-12 year old children and; (ii) families with 15-21 year old children as the price per ticket rises from $50 to $75, and then increases from $75 to $100. Compute the simple average of these two elasticity estimates such that you have an average elasticity estimate for families with children ages 6-12 and families with children ages ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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