Comments

  1. avatar says

    I’m stuck on example 6 chapter 7. Selling price £100 p.u demand 20,000 per annum. For every £2 change in selling price demand will change by 2000 units. On looking at the answer P=120-0.001Q I get where the 0.001 comes from but where do you get the 120 from?

    Thanks
    Vikki

  2. avatar says

    Conventional way of calculating the slope of the demand curve is Changes in Quantity/Changes in Price. Why does ACCA Text use Changes in Price/Changes in Quantity? However, I do understand a slope of a straight line is Changes in Y/Changes in X.

    • Profile photo of John Moffat says

      I don’t know why you say the conventional way of calculating the slope is change in demand/change in price.

      For the price elasticity of demand, then it is demand / price, but the conventional price/demand equation is P = a – bQ for which the slope is b which is change in price/change in demand.

    • Profile photo of John Moffat says

      @musema, Because we assume that the relationship is linear, a reduction in price causes an increase in demand, and an increase in price causes the same reduction in demand.
      The equation cannot be P = 10 – 0.01Q, because that would mean that the current demand of 2000 would give a selling price of 10 – 20 = -10!!!
      The lecture is correct.

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