Zooba Oil Limited produces coconut oil in a community where producers are able to switch back… 1 answer below »

Zooba Oil Limited produces coconut oil in a community where producers are able to switch back and forth between coconut oil and palm oil depending on market conditions. Consequently, the management of Zooba Oil Limited consulted an economist who estimated the demand function for the its product using data from 30 markets as follows: Qg = 1,000 – 9.SPc + 16.2Pp + 0.2M, where Qg is the quantity of coconut oil demanded in kilograms per month, Pc is the average price of coconut oil in Ghana Cedis, Pp is the average price of palm oil in Ghana Cedis, and M is the income of consumers.

a. Assuming Pc is initially GHG 45 per kilogram, Pp is GFR31 per kilogram, and Q is 1,275 kilograms per month. i. Calculate the own price and cross-price elasticities of demand for coconut oil and explain your answers. [2 marks] ii. Will you recommend an increase in price, a decrease in price or stable price for coconut oil? Explain. [2 marks] iii. Explain the relationship between coconut oil and palm oil? [2 marks]

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