Calculate the price and cross-price elasticities of demand for coconut oil. The coconut oil demand function (Buschena and Perloff, 1991)is q = 1200 − 9.5p + 16.2pp + 0.2Y, where Q is the quantity of coconut oil demanded in thousands of metric tons per year, p is the price of coconut oil in cents per pound, pp is the price of palm oil in cents per pound, and Y is the income of consumers. Assume that p is initially 45¢ per pound, pp = 31¢ per pound, and Q=1,275 thousand metric tons per year. (Hint: dQ/dp = −9.5 and dQ/dpp = 16.2.)
Calculate the price and cross-price elasticities of demand for coconut oil. The coconut oil demand function (Buschena and Perloff, 1991)is q = 1200 − 9.5p + 16.2pp + 0.2Y, where Q is the quantity of coconut oil demanded in thousands of metric tons per year, p is the price of coconut oil in cents per pound, pp is the price of palm oil in cents per pound, and Y is the income of consumers. Assume that p is initially 45¢ per pound, pp = 31¢ per pound, and Q=1,275 thousand metric tons per year. (Hint: dQ/dp = −9.5 and dQ/dpp = 16.2.)
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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9 Calculate the
The coconut oil demand function (Buschena and Perloff, 1991)is
q = 1200 − 9.5p + 16.2pp + 0.2Y,
where Q is the quantity of coconut oil demanded in thousands of metric tons per year, p is
the price of coconut oil in cents per pound, pp is the price of palm oil in cents per pound,
and Y is the income of consumers. Assume that p is initially 45¢ per pound, pp = 31¢ per
pound, and Q=1,275 thousand metric tons per year. (Hint: dQ/dp = −9.5 and
dQ/dpp = 16.2.)
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