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Calculating price elasticity of demand - example

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Details: Suppose you are a painter, and the price of a gallon of paint increases from $3.00 a gallon to $3.50 a gallon. Your usage of paint drops from 35 gallons a month to 20 gallons a month. Perform the following:
1.Compute the price elasticity of demand for paint and show your calculations.
2.Decide whether the demand for paint is elastic, unitary elastic, or inelastic.

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1. Price elasticity of demand is the ratio of the change in demand to the change in price. You calculate it by dividing the % change in quantity demanded by the % change in ...

Solution Summary

Sample calculation of the price elasticity of demand for paint given the changes in price and quantity demanded.

$2.19