Hello,
I’m working through Schweser’s 2017 Level 1 chapter on Supply/Demand. I’m on p. 5, doing BB #1 A demand function for gasoline is as follows: QDgas = 107,500 - 12,500Pgas Calculate the price elasticity at a gasoline price of $3/gallon. OK, so far so good. Use the price elasticity of demand equation. Except Schweser throws in a curveball:
_ Answer: We can calculate the quantity demand at a price of $3/gallon as 138,500 - 12,500(3) = 101,000_ Where did the underlined 138,500 come from? I get multiplying 12,500 by 3, but is there something that I’m missing that led us to 138,500?