(a)
To calculate the
Explanation of Solution
The following equations for demand and supply are given:
Substitute the values of R and T to solve for demand and supply equations in terms of
At equilibrium,
Substitute the value of price in any of the two equations to solve for equilibrium quantity as follows:
(b)
To calculate the price
Explanation of Solution
The price elasticity of demand measures the degree of responsiveness of a change in the quantity demanded for a given change in the price level. It is calculated as follows:
The price elasticity of demand at equilibrium values is '-0.52'.
The price elasticity of supply measures the degree of responsiveness of a change in the quantity supplied for a given change in the price level. It is calculated as follows:
The price elasticity of supply at equilibrium values is '+1.30'.
(c)
Cross-price elasticity of demand for golf balls with respect to the price of titanium.
Explanation of Solution
The cross-price elasticity of demand measures the degree of responsiveness of a change in the quantity demanded of a good for a given change in the price of some other good.
It is calculated as follows:
The negative sign indicates that titanium and golf balls are complements, i.e., when the price of titanium goes up, the demand for golf balls decreases.
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Chapter 2 Solutions
EBK MICROECONOMICS
- Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning