Answer:
a. Popcorn sales would fall by 10%.
b. Popcorn sales would fall by 25%.
Explanation:
Question wants to know how much popcorn sales would fall by if the price increased by 20% and 50%.
a. Price increased by 20%
Price elasticity measures the change in quantity demanded as a result of a change in price. For normal goods it is assumed that the elasticity is negative which means that an increase in price leads to a decrease in quantity demanded:
Change in quantity demanded = elasticity * change in price
= 0.5 * 20%
= 10%
Popcorn sales would fall by 10%.
b. Price increased by 50%:
= 0.5 * 50%
= 25%
Popcorn sales would fall by 25%.
