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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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View Full Document 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.
 Spring '11
 Sheng

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