The coconut oil demand function (Bushena and Perloff, 1991) is Q=1,200-9.5p+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 50 cents per pound, pp is 31 cents per pound, and Q is 1,400 thousand metric tons per year. Calculate the price elasticity of demand for coconut oil and the cross-price elasticity of demand (with respect to the price of palm oil) The price elasticity of demand is 8= (Enter your response rounded to three decimal places and include a minus sign.) The cross-price elasticity of demand is 8= ☐ (Enter your response rounded to three decimal places.)
The coconut oil demand function (Bushena and Perloff, 1991) is Q=1,200-9.5p+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 50 cents per pound, pp is 31 cents per pound, and Q is 1,400 thousand metric tons per year. Calculate the price elasticity of demand for coconut oil and the cross-price elasticity of demand (with respect to the price of palm oil) The price elasticity of demand is 8= (Enter your response rounded to three decimal places and include a minus sign.) The cross-price elasticity of demand is 8= ☐ (Enter your response rounded to three decimal places.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The coconut oil demand function (Bushena and Perloff, 1991) is
Q=1,200-9.5p+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 50 cents per pound, pp is 31 cents per pound, and Q is 1,400 thousand metric tons per year. Calculate the
price elasticity of demand for coconut oil and the cross-price elasticity of demand (with respect to the price of palm oil)
The price elasticity of demand is
8=
(Enter your response rounded to three decimal places and include a minus sign.)
The cross-price elasticity of demand is
8=
☐ (Enter your response rounded to three decimal places.)
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