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    Calculate the price elasticity of demand.

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    Demand for DVD rentals at a video store is described by the equation: Q = 4,000 - 500P, where Q denotes the number of DVDs rented per week and P is the rental price in dollars.

    a) Determine the point price elasticity of demand at P = $3.00.
    b) What is the new point price elasticity if price is raised to P = $4.50?
    c) Comment on the change in elasticity.

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    https://brainmass.com/economics/elasticity/calculate-price-elasticity-demand-405186

    Solution Preview

    a) Determine the point price elasticity of demand at P = $3.00.

    Q=4000-500*P

    Given, P=$3.00
    Q =4000-500*3=2500

    Q=4000-500P
    Differentiating with respect to P, we get
    dQ/dP=-500

    Price elasticity ...

    Solution Summary

    The solution describes the steps to calculate price elasticity of demand at given price levels. It also analyzes the results obtained. The change in elasticity is commented on.

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