Elasticity of demand on paint
Not what you're looking for?
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.
Purchase this Solution
Solution Summary
Solution estimates elasticity of demand on paint
Solution Preview
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.
Price elasticity= % change in demand/% change in price
= % Change in demand= Change in demand /Original Demand
= % Change in Price= Change in Price/Original Price
=-((15)/35)/(0.5/3)
=-2.571
As Price elasticity is more than 1 , thus the Demand for ...
Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.