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30-05-2024
Business

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John wants to open a donut shop but has concersn about the local demand for donuts. He has hired a market analysis firm to provied data on consumer demand for donuts in the local area. After an extensive field study, the firm reports that the average weekly demand for donuts in the area was 14,000 donuts at a price of $1.20 per donut. Furthermore, they also reported that at this price and quantity, the price elasticity of demand was 1.8 and that the demand response curve was essentailly linear. Assume the inverse demand equation takes on the form P = a - bQ. Solve the following:
1. Derive the algerbraic expression for price elasticity of demand, using the folling equaiton P = a - bQ?

Answer :

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