2009Problem Set 7

2009Problem Set 7 - AEM 4150 Price Analysis Fall Semester...

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AEM 4150 Price Analysis Fall Semester 2009 Homework Assignment 7 This assignment is due at the beginning of class on Tuesday November 3. Total points 13 Question 1 Soybeans are processed into the joint products soybeans meal and oil. Consider 50 pounds of soybean, which is processed into 30 pounds of meal and 10 pounds of oil. We assume that the price of soybean meal is 12 cents per pound and that the price of soybean oil is 18 cents per pound. We further assume that the price elasticities for meal and oil are respectively –0.7 and –1.5. (a) State the formula calculating the price elasticity of soybeans and the assumptions under which this formula is valid (1 point) (b) Using (a) calculate the price elasticity of soybeans, using the price elasticities of soybean meal and soybean oil (1 point) Question 2 Suppose that lamb was determined to have only 2 significant substitutes, beef and pork. Given the following information the own price elasticity of demand for lamb is –0.53 the cross price elasticity of demand for lamb with respect to beef is 0.29
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