Question

Q_{d} = - 22 P +10 P_{p} + 0.05 I + 0.001A where
Q is the quantity of beef demanded in units of hundred pounds, P is
the price for beef per pound, I is the average income of a
household, P_{p} is the price for pork per pound, and A is
the money spent on US brand Image Advertisement.

Assume you are part of the managerial team trying to create a report based on the following questions.

a) As of 2010, data shows that I=30,000 and P_{p}=20 and
they will spend $100,000 for the Advertisement. Given the above
information, write the demand equation (curve) as a function of
price.

b) using the members of US Beef Association’s supply plan and
current Korean supply of beef, the supply curve for beef in Korea
is as follows: Q_{s} = 840 + 8 P where Q is the quantity of
beef supplied in hundred pounds and P is the price of beef per
pound. What would be the equilibrium market price and quantity of
beef?

c) Using the price and quantity you found in b), what is the price elasticity of demand for beef? Is it elastic or inelastic?

d) Find the cross-price elasticity between beef and pork? What kind of relationship between beef and sauce shows by the sign of the elasticity?

Answer #1

FORMULAS:

**CROSS PRICE ELASTICITY OF DEMAND** = % change in
quantity demanded for Product A / % change in the
**price** of product B

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