CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

If the price of tickets to Disney World increases from $30 to $33 and as a result attendance falls by 5 percent, the demand for the tickets is ______.
A. inelastic
B. indeterminate
C. elastic
Explanation: The percentage change in price is: (33-30)/[(30+33)/2] = 9.5%. Since the percentage change in demand was 5 percent, demand is characterized as inelastic; the percentage change in price was greater than the subsequent percentage change in demand.

User Contributed Comments 6

User Comment
Gina percentage change in price [(33-30)/31.5]x100 = 9.5%. price increase 9.5%, demand decrease 5% E=1/2, hence inelastic demand
geet I agree.
wink44 Price Change % > Quantity Change % ... inelastic
jgraham6 Tricky!
viannie Just do the math ... I eyeball it but safer to just do the math ;)

Elasticity = % change in Qty / % change in Price = 5% / 9.5% = 0.5 (about)

so it is less than elasticity of 1, that means it is inelastic!
petervinh18 PEoD = % change in quantity demand / % change in price

% change in quantity demand = 5%
% change in price = (NewPrice-OldPrice)/OldPrice
= (33-30)/30 = .10

PEoD = 5% / .1 = .5 < 1; inelastic
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