Problem Set 1 - Solutions

# Problem Set 1 - Solutions - ECON 301 Problem Set 1...

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ECON – 301 Problem Set 1 – Solutions 1) 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 . 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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ECON – 301 2) We know that along a linear demand curve
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## This note was uploaded on 05/11/2011 for the course ECON 301 taught by Professor Sheng during the Spring '11 term at ITT Tech Pittsburgh.

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Problem Set 1 - Solutions - ECON 301 Problem Set 1...

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