JSHamm 9 Posted September 23, 2008 Share Posted September 23, 2008 Got this quiz coming up and I'm trying to understand and solve the following equation:Buschena and Perloff (1991) estimated the coconut oil demand function to be:Q = 1,200 − 9.6P + 16.2PP + 0.2 YwhereQ = quantity of coconut oil demanded in thousands of metric tons per yearP = price of coconut oil in cents per poundPP= price of palm oil in cents per poundY = is the income of consumers.i. Calculate the price elasticity and cross-price elasticity of demand for coconut oil. Assume that P is initially 45¢ per pound, PP is 31¢ per pound, and Q is 1,275 thousands of metric tons per year.ii. Calculate the income elasticity of coconut oil. [if you do not have all the information necessary to calculate numerical answers, write your answers in terms of variables.]I just don't get it. if anyone can explain how to solve this I'd appreciate it. Link to post Share on other sites
HollywoodAFD 0 Posted September 23, 2008 Share Posted September 23, 2008 The answer is 4duh Link to post Share on other sites
JSHamm 9 Posted September 23, 2008 Author Share Posted September 23, 2008 The answer is 4duh Link to post Share on other sites
Sal Paradise 57 Posted September 23, 2008 Share Posted September 23, 2008 I probably could have answered this pretty easily about five years ago, but not anymore. so all you have to do is go study some quantum physics real quick, probably some mechanical engineering, build a time machine, put it on the back of a truck, drive down here and pick me up, and we can travel back in time 5 years ago and ask me then.and don't let me forget to remind myself: "she's a whore but she's rich. stick with her." Link to post Share on other sites
Sheiky 0 Posted September 23, 2008 Share Posted September 23, 2008 http://www.youtube.com/watch?v=MNiEHvw6TTg Link to post Share on other sites
WrongWay 0 Posted September 23, 2008 Share Posted September 23, 2008 Got this quiz coming up and I'm trying to understand and solve the following equation:Buschena and Perloff (1991) estimated the coconut oil demand function to be:Q = 1,200 − 9.6P + 16.2PP + 0.2 YwhereQ = quantity of coconut oil demanded in thousands of metric tons per yearP = price of coconut oil in cents per poundPP= price of palm oil in cents per poundY = is the income of consumers.i. Calculate the price elasticity and cross-price elasticity of demand for coconut oil. Assume that P is initially 45¢ per pound, PP is 31¢ per pound, and Q is 1,275 thousands of metric tons per year.ii. Calculate the income elasticity of coconut oil. [if you do not have all the information necessary to calculate numerical answers, write your answers in terms of variables.]I just don't get it. if anyone can explain how to solve this I'd appreciate it.1275 = 1200 - 9.6*45 + 16.2*31 +.2Y1275 = 1200 - 432 + 409.2 + .2Y1275 = 1177.2 + .2Y.2Y = 97.8Y = 489 unspecified monitary units per unspecified time unit.Toss that out. Irrelivant for now.Price elasticity = % change in demand / % change in price. %change = amount of change/original amountUsully in these problems you are given a range, not just initial values. The are called the supply and demand curve because they curve. The elasticity at one point may not be the same as the elasticity at another. I'm going to assume, for the heck of it, that the 2 points are initial price and initial price + 1 cent.Let's say price goes up 1 cent. Demand falls 9.6 thousand metric tons. Right? Q = 1,200 − 9.6P + 16.2PP + 0.2 YIgnore all the terms except P and Q by assume all others are fixed. If P goes up one, Q goes down 9.6.%change = amount of change/original amount1/45 = 2.22 % change in price-9.6/1275 = -.75 % change in demanPrice elasticity = % change in demand / % change in price. Price elasticity = -.75/2.22 = -.34 from 45 to 46 cents.Cross price is the same, but with the Palm oil.1 cent rise in Palm Oil increases demand for Cocnut Oil by 16.2 thousand metric tons.1/31 = 3.22% change in price16.2/1275 = 1.27% change in demand1.27/3.22 = .39 from 31 to 32 centsThe elasticity of price is dependant on out Y above. Initial value is 489. An increase of 1 recults in a change in demand of .21/489 = .204 % change in income.2/1275 = .000157 change in demand.000157/.204 = .00077 elasticity of income from 489 to 490 unspecified units of income per unspecified unit of time.At least, that is how I think it goes. Better double check with someone else if an important grade is riding on this. Been 15 years since I was in an econ class. Link to post Share on other sites
JSHamm 9 Posted September 23, 2008 Author Share Posted September 23, 2008 1275 = 1200 - 9.6*45 + 16.2*31 +.2Y1275 = 1200 - 432 + 409.2 + .2Y1275 = 1177.2 + .2Y.2Y = 97.8Y = 489 unspecified monitary units per unspecified time unit.Toss that out. Irrelivant for now.Price elasticity = % change in demand / % change in price. %change = amount of change/original amountUsully in these problems you are given a range, not just initial values. The are called the supply and demand curve because they curve. The elasticity at one point may not be the same as the elasticity at another. I'm going to assume, for the heck of it, that the 2 points are initial price and initial price + 1 cent.Let's say price goes up 1 cent. Demand falls 9.6 thousand metric tons. Right? Q = 1,200 − 9.6P + 16.2PP + 0.2 YIgnore all the terms except P and Q by assume all others are fixed. If P goes up one, Q goes down 9.6.%change = amount of change/original amount1/45 = 2.22 % change in price-9.6/1275 = -.75 % change in demanPrice elasticity = % change in demand / % change in price. Price elasticity = -.75/2.22 = -.34 from 45 to 46 cents.Cross price is the same, but with the Palm oil.1 cent rise in Palm Oil increases demand for Cocnut Oil by 16.2 thousand metric tons.1/31 = 3.22% change in price16.2/1275 = 1.27% change in demand1.27/3.22 = .39 from 31 to 32 centsThe elasticity of price is dependant on out Y above. Initial value is 489. An increase of 1 recults in a change in demand of .21/489 = .204 % change in income.2/1275 = .000157 change in demand.000157/.204 = .00077 elasticity of income from 489 to 490 unspecified units of income per unspecified unit of time.At least, that is how I think it goes. Better double check with someone else if an important grade is riding on this. Been 15 years since I was in an econ class.awesome, i think, simple question though. how come you took out the decimals from .45 and .31 given they are cents.Also, the 16.2*31 is 502.2 but you listed 409.2. am i missing something? Link to post Share on other sites
Whalers2005 0 Posted September 23, 2008 Share Posted September 23, 2008 I majored in Econ.. tell your teacher in the real world..you have computers or an assistant doing all this crap.. or maybe I'm just bad at my job Link to post Share on other sites
WrongWay 0 Posted September 23, 2008 Share Posted September 23, 2008 awesome, i think, simple question though. how come you took out the decimals from .45 and .31 given they are cents.The formula is defined as being in cents.... from the OP:P = price of coconut oil in cents per poundPP= price of palm oil in cents per poundPutting them in as .45 or .31 would mean .45 cents ($.0045) per pound.Also, the 16.2*31 is 502.2 but you listed 409.2. am i missing something?Typo into the calculator. I must have typed 13.2 when I ment 16.2. Right finger, wrong row. 502.2 is correct, which alters the original Y, and makes my elasticity of income all wrong. Link to post Share on other sites
Sal Paradise 57 Posted September 23, 2008 Share Posted September 23, 2008 Typo into the calculator. I must have typed 13.2 when I ment 16.2. Right finger, wrong row. 502.2 is correct, which alters the original Y, and makes my elasticity of income all wrong.so the housing market isn't collapsing? Link to post Share on other sites
WrongWay 0 Posted September 23, 2008 Share Posted September 23, 2008 so the housing market isn't collapsing?Well, to be correct, instead of facing $5 trillion in defaults, resulting in $3.3 trillion in losses, it is more like $4.9 trillion in defaults with $3.25 trillion in losses. From residential. Commercial will be a bit smaller.I'm not sure if that still classifies as a crash or not. The formal definition seems a bit vague. Link to post Share on other sites
Sal Paradise 57 Posted September 23, 2008 Share Posted September 23, 2008 sweet! out of the woods! Link to post Share on other sites
Piddle Duck 0 Posted September 23, 2008 Share Posted September 23, 2008 sweet! out of the woods!Nope.Your tin can with no roof is still planted deeply in the woods of VA. Link to post Share on other sites
Sal Paradise 57 Posted September 23, 2008 Share Posted September 23, 2008 Nope.Your tin can with no roof is still planted deeply in the woods of VA.I HAVE A YARD. Link to post Share on other sites
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