Purchase Solution

# Price Elasticity of Demand for Paint: Supply and demand from a microeconomics perspective

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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:

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.

##### Solution Preview

The formula for Price Elasticity of Demand (PeD) is:

PeD = (Percentage change in Demand) / (Percentage change in Price)

Where:

Percentage change in Demand= (Current demand - Old demand/ (Old demand)

Percentage change in Price = (Current price - Old Price) / (Old price)

Computation
Given:

Old price of paint: \$3
New price: \$3.50
Old demand for paint: 35 gallons
New demand for paint: 20 gallons

Substituting the values in the ...

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