Essay
Demand for DVD rentals at a video store is described by the equation: Q = 4,000 - 500P, where Q denotes the number of DVDs rented per week and P is the rental price in dollars.
(a) Determine the point price elasticity of demand at P = $3.
(b) What is the new point price elasticity if price is raised to P = $4.50? Comment on the change in elasticity.
Correct Answer:
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Q = 4,000 - (500)(4.5) = 1,750, and EP = ...View Answer
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