Marissa Allen
MAT 145
Richard Flint
February 9th, 2017
How to Win Clients with Price Elasticity of Demand for Gas I was recently hired by Jim in order to explain mathematical and economic concepts to him for his gas station. I was given a demand function that was left over from Jim’s previous consultant. As the price of gas increased, the demand for gas decreases. This makes sense because as the price of something increases, demand for it will go down. Jim is worried about if he’ll be able to stay in business if the price of gas returned to four dollars per gallon. In order to answer Jim’s questions, we can use the slope of the slope to measure the ratio of change in a variable as a percentage of the original amount of the variable. Then we’re going to investigate the price elasticity of demand. Price elasticity of demand tells us the percentage change in quantity demanded in response to a one percent change in price. This is important to us because this measure is used in economics to show the responsiveness, or
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We need to get the formula to equal so we can find our general formula for elasticity of demand. In order to do that we have to switch around some values. We can see that so all we have to do is get our change in over our change in to find our answer. In order to do this, we have to get rid of our change of p over p in the denominator. We do this by multiplying the numerator and denominator by . This brings our change in right underneath our change in , right where we want it. Now all we have to do is rearrange the order in our denominator. Three times four is the same as four times three, so we can easily just swap the order. Now that our change in is right underneath our change in , we can place what we’re multiplying it by into a separate fraction. Now that we have our two separate fractions, we can use the formula we were given in the beginning to simplify that part, multiplied by the other fraction. We see this in our calculations