Question
In: Economics
A DVD rental firm is currently renting 8,000 DVDs per year. How many DVDs will the...
A DVD rental firm is currently renting 8,000 DVDs per year. How many DVDs will the firm be renting in 10 years if the demand for DVD rentals is expected to increase by 7% per year
Solutions
Expert Solution
DVD RENTAL FIRM CURRENTLY RENTING 8000 DVD'S PER YEAR.
AND DEMAND RATE IS INCREASING 7%.
| YEAR | SALE OF PREVIOUS YEAR (A) | DEMAND RATE (B) | TOTAL VALUE (A+B) |
| 1 | 8000 | 7% | 8560 |
| 2 | 8560 | 7% | 9159. |
| 3 | 9159 | 7% | 9800. |
| 4 | 9800 | 7% | 10486 |
| 5 | 10486 | 7% | 11220 |
| 6 | 11220 | 7% | 12005 |
| 7 | 12005 | 7% | 12845 |
| 8 | 12845 | 7% | 13744 |
| 9 | 13744 | 7% | 14706 |
| 10 | 14706 | 7% | 15735 |
HERE THE DEMAND AT THE END OF 10 YEARS IS 15735 WITH A CONDITION OF CONSTANT INCREASE IN THE DEMAND RATE EVERY YEAR .
CALCULATION:
FOR FIRST YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
= 8000 +(7% *8000)
= 8000+560
= 8560
FOR SECOND YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
= 8560 +(7%*8560)
=8560+599
= 9159
FOR THIRD YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
=9159+(7%*9159)
=9159+641
=9800
FOR FOURTH YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
= 9800 +(7%*9800)
= 9800+686
= 10486
FOR FIFTH YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
= 10486+ (7%*10486)
= 10486+734
= 11220
FOR SIXTH YEAR = DEMAND OF PREVIOUS YEAR+ DEMAND RATE
= 11220 +(7%*11220)
= 11220+785
=12005
FOR SEVENTH YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
=12005 +(7%*12005)
=12005 +840
=12845
FOR EIGHT YEAR = DEMAND FOR PREVIOUS YEAR + DEMAND RATE
= 12845 +(7%*12845)
=12845 +899
=13744
FOR NINTH YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
= 13744 + (7%*13744)
=14706 +962
FOR TENTH YEAR = DEMAND OF PREVIOUS YEAR + DEMAND RATE
= 14706+ (7%*14706)
=14706 + 1029
= 15735
Rahul Sunny answered 2 years agoRelated Solutions
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