Answer to Question #297556 in Economics of Enterprise for Myls

Question

Your market research unit submitted the income elasticity of demand estimate for non-fed ground beef at 1.94. The economic managers reported that due to a Pandemic the economy will slide into a deep recession and incomes on average are expected to decrease by 15 percent over the next two years. As manager of a meat processing plant, what will be the effect of your purchase of non-feed cattle beef? 

Items- Selected cross-price elasticity

Transportation - 1.8

Foods - 0.08

Ground beef, non-fed - -1.94

just explain.

Answer 1

The elasticity of transport of 1.8 indicates that there will be a greater change in the need for transportation by a greater margin as income reamain constant. Since 1.8 is greater than 1, the change is great.

The foods will have an elasticity of demand of 0.08 which is less than 1 indicating insignificant change as opposed to ground beef,non-fed which is -1.94 which signifies that the change is far much more negligible.