A recent trend in the restaurant industry is to use locally produced foods. Cons
ID: 1212154 • Letter: A
Question
A recent trend in the restaurant industry is to use locally produced foods. Consequently, you are interested in the estimating the demand and supply for locally produced burritos in college towns. You have collected data on the price of burritos in each town, the quantity of burritos sold, the income of students, the local price of beef, and the local price of salsa.
a. Carefully explain how you would use this data to construct a consistent estimate of both the slope of the supply curve and the slope of the demand curve. Be careful to specify your estimation method and each step you would use to estimate each curve.
b. How would your answer change if instead of slopes, we wanted to estimate the elasticity of supply and the elasticity of demand?
Explanation / Answer
a. here we know that there is already established marekt is there for burritos and there are some producers, they are producing some quantity of output at the given price levels. so based on this numbers we can estimate the new demand for our product at a pressumed price levels. usually the demand is for buritos will be constant ane there will not be much fluctuations happened. but we can fix where the demand curve and suppy curves intersect each other it is the break even point to decides the price and quantity to the products.
b. slope explains the pattern of sales during a given period where as elasticity explains the relationship between sales and its prices or sales and its input variations, the relationship between one variable to another.