Suppose a shortage in materials results in decrease in the supply of golf balls in the United States of 5%. If the elasticity of

Question

gladu [14]

3 years ago

9

Suppose a shortage in materials results in decrease in the supply of golf balls in the United States of 5%. If the elasticity of

demand of golf balls sold in the US is -0.8, the new equilibrium price will be

Business

1 answer:

snow_lady [41] · Answer 1 · 2021-12-20T09:08:05+03:00

Answer:

price elasticity of supply (PES) = % change in quantity supplied / % change in price

PES = -0.8
% change in quantity supplied = -5%

-5% = -0.8 / % change in price

% change in price = -0.8 / -5% = 16%

we are not given the initial price of the golf balls and I looked for similar questions but couldn't find any. But assuming that the initial price is $1, then the new price = $1 x (1 + 16%) = $1.16. If the initial price was $2, then new price = $2 x (1 + 16%) = $2.32. And son on.