Answer to Question #261810 in Financial Math for Lister Nanzumwa

Question

Given the demand function for computer as p=2400-0.5Q determine the coefficient of point of elasticity of demand when p=1800

Answer 1

$P=2400 -0.4Q \\ 0.4Q = 2400 -P \\ Q = \frac{2400}{0.4} - \frac{P}{0.4} \\ Q = 6000 -2.5P \\ \frac{∂Q}{∂p} = \frac{∂}{∂P}(6000 -2.5P) \\ \frac{∂Q}{∂p} = -2.5$

For P=1800

$Q= 6000 -2.5 \times 1800 = 6000 -4500 = 1500$

The coefficient of point of elasticity of demand can be obtained by using the formula:

$e_p = \frac{∂Q}{∂p} \times \frac{P_0}{Q_0} \\ e_p = -2.5 \times \frac{1800}{1500} \\ e_p= -3$