Question

Currently, Harry is a member of a Bollywood club where he pays a membership fee of $30 and can buy rent as many DVDs as he wants for a price of $7 a DVD. His marginal willingness to pay for DVDs is given by MWTP= 20-Q. It is time to renew his membership and he is told that the price per DVD will increases to $14. What is the change in the number of DVDs Harry rents a month? Include a negative sign if his quantity decreases.

Answer 1

Answer : When the price of DVDs is $7 per DVD,

Given,

P = MWTP = 20 - Q

By putting P = 7 in above equation we get

7 = 20 - Q

=> Q = 20 - 7

=> Q = 13

When the price of DVDs become $14 per DVD, by putting P = 14 in demand function we get,

14 = 20 - Q

=> Q = 20 - 14

=> Q = 6

So, the changes in the number of DVDs when the price of DVDs increases = Q2 - Q1 = 6 - 13 = - 7

Therefore, here the changes in the number of DVDs is -7. This means that number of DVDs decreases by 7.