Demand and elasticity The economic advisor of a large tire store proposes the demand function D(p) = 1800/p-40, where D(p) is the number of tires of one brand and size that can be sold in one day at a price p.
c. Find the elasticity function on the domain of the demand function.

Key Concepts

Demand Function

A demand function expresses the relationship between the price of a good and the quantity demanded by consumers. In this case, D(p) = 1800/p - 40 indicates how the number of tires sold changes as the price p varies. Understanding this function is crucial for analyzing how price affects consumer behavior in the market.

Elasticity of Demand

Elasticity of demand measures how responsive the quantity demanded is to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. This concept helps determine whether demand is elastic (sensitive to price changes) or inelastic (less sensitive), which is essential for pricing strategies.

Calculating Elasticity

To find the elasticity function, we use the formula E(p) = (D'(p) * p) / D(p), where D'(p) is the derivative of the demand function with respect to price. This calculation provides a function that describes how elasticity varies with price, allowing for a deeper understanding of consumer sensitivity to price changes across different price levels.