Microeconimics: Deliverable Length: 1-2 page Word document Suppose you are a pai
ID: 1249867 • Letter: M
Question
Microeconimics: Deliverable Length: 1-2 page Word document
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.
***Plus include at least 2 sou rces in APA Format
Explanation / Answer
Ed = (Q/Q)/(P/P)
= (-15/30)/(0.5/3)
= -3
price elasticity of demand,Ed = -3
since -< Ed < -1 , the demand for paint is elastic
relative elastic nature of paint refers that the percentage change in the quantity of paint demanded is greater than the percentage change in its price, that is why Ed < -1,
as (Q/Q) > (P/P)