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PS7_ProblemSet - Price Analysis AEM 4150 Fall 2008 Homework...

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Price Analysis AEM 4150 Fall 2008 Homework Assignment #7 Due Date: Tuesday November 4, 2008 1. Elasticities and Joint Products: The fresh oranges and orange juice that are produced by Florida’s orchards can be considered to be joint products - the best, grade A, oranges being marketed fresh while blemished, lower- grade, oranges are processed and marketed as orange juice. Demand for fresh oranges is relatively inelastic compared to the demand for orange juice. Suppose that the own-price elasticity of demand for fresh oranges from Florida's orchards has been estimated to be -0.68 and the own-price elasticity of demand for the orange juice they make from their oranges has been estimated to be -1.54. Given the following additional information: Florida's orchards market some 90,000 bushels of oranges each year, 75,000 bushels of them being sold as fresh oranges, and that the average price at the farm gate for fresh oranges is $12.00/bu and the bushel-equivalent price of orange juice is $9.00/bu, What is the price elasticity of the basic commodity, oranges?
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