{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Ans_HW1 - Answer to homework2 2.16 a Substituting the...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Answer to homework2 2.16. a) Substituting the values of R and T , we get P Q Supply P Q Demand s d 5 14 : 2 70 : + - = - = In equilibrium, 70 – 2 P = –14 + 5 P , which implies that P = 12. Substituting this value back, Q = 46. b) Elasticity of Demand = –2(12/46), or –0.52. Elasticity of Supply = 5(12/46) = 1.30. c) 43 . 0 ) 46 10 ( 2 tan , - = - = ium ti golf ε . 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. 2.18. a) Since the two goods are rather close substitutes for each other, you would expect that the demand for Tylenol would go up if the price of Advil increases and vice versa. Therefore, the cross price elasticity will be positive. b) Similar to part (a). Although VCRs and DVD players are not very close substitutes, if the price of VCRs were to go up substantially, potential buyers would probably decide to pay a little bit more and get the higher-end DVD player. Similarly if the latter becomes expensive, some consumers will not be able to afford it and will switch to the VCR instead. The elasticity will be positive. c) Since the two usually go together, a sharp increase in the price of one will
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern