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Calculating the own price elasticity of demand

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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:

Compute the price elasticity of demand for paint and show your calculations.
Decide whether the demand for paint is elastic, unitary elastic, or inelastic.
Explain your reasoning and interpret your results.

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Solution Summary

Solution calculates and interprets the value of price elasticity of demand in the given case.

Solution Preview

Please refer attached file for complete solution. Expressions typed with the help of equation writer are missing here.

Solution:
We can use midpoint formula to estimate price elasticity of demand for paint. It ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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