question archive In a local hardware store, the price of the store brand indoor house paint is $18 per gallon
In a local hardware store, the price of the store brand indoor house paint is $18 per gallon
Subject:EconomicsPrice:2.88 Bought3
In a local hardware store, the price of the store brand indoor house paint is $18 per gallon. The daily volume of sales is 30 gallons. The price elasticity of demand for the paint is -3.
Determine the demand equation for the paint assuming that it is linear.
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Price elasticity for demand is given by
Ep= dP%/dQ%
Where
Ep = elasticity = -3
dP% = % change in price = (P - 18)/18
dQ= % change in quantity = (Q- 30)/30
Therefore we have
((P-18)/18)/((Q-30)/30) = -3
(P-18)/18 =-3* (Q-30)/30
P-18 = -18 * (Q-30)/10
P-18 = -1.8Q +54
P = 54+18 -1.8Q
P= 72 - 1.8Q
This is the demand equation.
