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7 January, 04:18

Suppose a new manufacturing technology results in an expansion in the supply of golf balls in the United States of 15%. If the elasticity of demand of golf balls sold in the US is - 0.4, the new equilibrium price will be

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  1. 7 January, 04:37
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    If the elasticity of demand of golf balls sold in the US is - 0.4, the new equilibrium price will be - 37.5% less price

    Explanation:

    In order to calculate the new equilibrium price If the elasticity of demand of golf balls sold in the US is - 0.4 we would have to use the following formula:

    Price elasticity of demand = percentage change in quantity demanded / percentage change in price of the good

    According to the given data we have the following:

    Price elasticity of demand=-0.4

    percentage change in quantity demanded=15%

    Therefore, - 0.4=15%/percentage change in price of the good

    percentage change in price of the good=15%/-04

    percentage change in price of the good=-37.5%

    Therefore, If the elasticity of demand of golf balls sold in the US is - 0.4, the new equilibrium price will be - 37.5% less price
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