Tuesday

July 29, 2014

July 29, 2014

Posted by **susie quick** on Tuesday, March 30, 2010 at 9:14pm.

- Microeconomics -
**susan**, Saturday, August 28, 2010 at 6:55pmyou 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.

- Microeconomics -
**DUCK**, Wednesday, March 30, 2011 at 9:49pm1. At $3 per gallon, you consumption is 35 gallons for expenditure of $105 per month. At $3.50 per gallon, your consumption drops to 20 gallons for expenditure of $75 per month. In that price range, the demand is relatively elastic. Calculation of Price Elasticity of Demand:

Q2 - Q1

-----------------------

( Q1 + Q2 ) / 2

-------------------------------

P2 - P1

-----------------------

( P1 + P2 ) / 2

20 gal - 35 gal / (35 + 20)/2 = -15 / 27.5 = -.5455

$3.50 - $3 / ($3 + $3.50)/2 = $.50 / $3.25 = .1538

-.5455 / .1538 = 3.5468 = 3.55

2. 3.55 > 1; demand is elastic

Edit: When demand is elastic, increasing the price decreases total revenue. When demand is inelastic, increasing the price increases total revenue. When demand is unitary elastic, changes in price don't effect total revenue.

Example of unitary elastic: Concert tickets can be priced $50, $75, $100, or $125. Research demonstrates that at $50, 3000 tickets will be sold. At $75, 2000 tickets will be sold. At $100, 1500 tickets will be sold. At $125, 1200 tickets will be sold.

Total revenue at each price/ticket sales level:

$50 x 3000 = $150,000

$75 x 2000 = $150,000

$100 x 1500 = $150,000

$125 x 1200 = $150,000

**Related Questions**

Microeconomics - Suppose you are a painter, and the price of a gallon of paint ...

economics - You are a painter, and the price of a gallon of paint increases from...

miccoeconomics - you are a painter, and the price of a gallon of paint increases...

home economics - compute the price elasticity of demand for paint and show ...

PRE-ALGEBRA - Paint costs $21 per gallon is to be mixed with 6 gallons of paint ...

Geometry - A man needs to repaint the two triangular gables on his house. Each ...

math - a local hardware store has a 10-gallon can of gray paint left over that ...

math - a painter is painting the ceiling of a square room. The walls are all 15 ...

Geometry - A gallon of paint costs $20 and covers 465 square feet. Three coats ...

math - A gallon of paint covers about 350 square feet how many gallons would be ...