The demand function for Super Big Bright LED light bulbs is Qd = (45 million)- (3.5 million × P). The company is currently charging a price of $8 per bulb, but is considering increasing the price to $10. How will the increase in price affect the quantity demanded?

Question

Quizplus · Accepted Answer

To find out the effect of price increase on quantity demanded, we can use the demand equation. 
Initial price, P = $8 per bulb 
New price, P' = $10 per bulb 
Initial demand, Qd = (45 million) - (3.5 million x 8) = 17 million bulbs 
New demand, Qd' = (45 million) - (3.5 million x 10) = 14 million bulbs 
The change in quantity demanded = Qd' - Qd = 14 million - 17 million = -3 million 
This means that the price increase would lead to a decrease in quantity demanded by 3 million bulbs. Therefore, the correct answer is C, consumers will decrease the quantity demanded by 7 million.

The Demand Function for Super Big Bright LED Light Bulbs