(a)
To calculate the
Explanation of Solution
The following equations for
Substitute the values of R and T to solve for demand and supply equations in terms of price only as follows:
At equilibrium,
Substitute the value of price in any of the two equations to solve for
(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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