- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 2. Elasticities of Demand

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**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.

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**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 |