According to the elasticity computation of 0.50, by how much would popcorn sales fall if the price increased by:

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%.

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