(a) If price of pork increases by 10 percent, by how much does demand for beef c

Question

(a) If price of pork increases by 10 percent, by how much does demand for beef change? (b) If price of pork increases by 10 percent, by how much does demand for food change? (hint use the cross-price elasticity values in Table below.) from excel.

Estimated Cross-Price Elasticity of demand (Exy) between selected commodities Commodity X Comodit Y Elasticity Magerine (US) Butter (US) 1.53 Pork (US) Beef (US) 0.4 Mutton/lamb (UK) Beef/veal (UK) 0.28 Pork (UK) Beef/veal (UK) 0 Natural gas (US) Electricity (US) 0.8 Coal (Ireland) Oil (Ireland) 0.7 Coal (Ireland) Natural Gas (Ireland) 0.4 Intertainment (US) Food (US) -0.72 European cars US Domestic & Asian cars 0.76 Asian cars US Domestic & European cars 0.61 US domestic cars European & Asian cars 0.28 Automobile (Australia) Bus transaportation (Australia) 0.07

Explanation / Answer

Pork (US) Beef (US) 0.40/ 0.10 = 4 percent increase in the demand forbeef change

Mutton/Lamb Beef/Veal (UK) 0.28/0.10 = 2.8 percent increase in the demand for beef change

Entertainment (US) Food (US) -0.72/ 0.10 = -7.2 percent decrease in the demand for food change

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