Question

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

Answer 1

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

Step-by-step 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