Elasticity of Paint Kirsten Bradley American InterContinental University Microeconomics- ECON220 August 9th 2011 Elasticity of Paint I am a local painter dealing with the rise in paint cost. Paint previously cost three dollars per gallon and I used thirty-five gallons of paint per week. The cost of paint rose to three-and-a-half dollars per gallon. Accordingly, my usage of paint dropped to twenty gallons a week. As a result of the price increase, the price of elasticity demand has changed as well. To calculate the price of elasticity of demand one must divide the percentage of change in quantity demanded by the percentage of change in price.
Before I am able to determine the price of elasticity of demand I must first calculate the percentage of change in quantity demanded followed by the percentage of change in price. This can be shown in example 1. Example 1: Price of Elasticity of Demand = (Percentage change in quantity demanded / Percentage change in price) First, I will compute the percentage of change in quantity demanded. To do this I must divide the quantity demanded by the initial quantity demanded. I then take this quotient and multiply it by 100 to get the percentage of change in quantity demanded.
For the paint I use, the change in quantity demanded is fifteen then to be divided by the initial quantity demanded and the total to be multiplied by one-hundred. This percentage of change in quantity demanded for paint is 42. 86%. This equation is expressed in Example 2. Example 2: Percentage of Change in Quantity demanded = (Change in quantity demanded / Initial quantity demanded) * 100 Percentage of Change in Quantity demanded = (15 / 35) * 100 Percentage of Change in Quantity demanded = (. 4286) * 100 Percentage of Change in Quantity demanded = 42. 6% Secondly, I will calculate the percentage of change in price. To do this I first must divide the change in price by the initial price and then multiply the total by one-hundred. For my paint, I would divide a half a dollar by three dollars and multiply by one-hundred. This Percentage of Change in Price for paint is 16. 67%. This can be found in example 3 below. Example 3: Percentage of Change in Price = (Change in price / Initial price) * 100 Percentage of Change in Price = (. 5 / 3) * 100 Percentage of Change in Price = (1. 667) * 100
Percentage of Change in Price = 16. 67 Finally, the price of elasticity of demand is calculated for paint. After calculating the percentage of change in quantity demanded to 42. 86% I can divide it by the percentage of change in price I previously calculated to be 16. 67%. The price of elasticity demand is 2. 57. Example 4, shown below, demonstrates how I determined the price of elasticity demand. Example 4: Price of Elasticity of Demand = (Percentage change in quantity demanded / Percentage change in price) Price of Elasticity of Demand = (42. 86 / 16. 7) Price of Elasticity of Demand =2. 57 According to Krugman and Wells (2009), the elasticity of a product has to do with its spot a scale. An item is considered elastic, if it is over one and inelastic if under one. If the item receives exactly a one for the price of elasticity of demand, than it is considered unitary elastic, or unit-elastic. In terms of the paint I use as a painter, the paint is elastic as it has a score over one. Reference: Krugman, P. & Wells, R. (2009). Economics (2nd ed. ). New York City, New York. Worth Publishers.
