# Question

Calculate the price and cross- price elasticities of demand for coconut oil. The coconut oil demand function (Buschena and Perloff, 1991) is

Q = 1,200 – 9.5p + 16.2pp + 0.2Y,

where Q is the quantity of coconut oil demanded in thousands of metric tons per year, p is the price of coconut oil in cents per pound, pp is the price of palm oil in cents per pound, and Y is the income of consumers. Assume that p is initially 45¢ per pound, pp is 31¢ per pound, and Q is 1,275 thousand metric tons per year.

Q = 1,200 – 9.5p + 16.2pp + 0.2Y,

where Q is the quantity of coconut oil demanded in thousands of metric tons per year, p is the price of coconut oil in cents per pound, pp is the price of palm oil in cents per pound, and Y is the income of consumers. Assume that p is initially 45¢ per pound, pp is 31¢ per pound, and Q is 1,275 thousand metric tons per year.

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