Eco – calculate the rothschild index for each industry

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Refer to the figure below:

(a) Use the estimated elasticities to calculate the Rothschild index for each industry.

Instruction: Round your answers to 3 decimal places.

Industry

Own Price Elasticity of Market Demand

Own Price Elasticity of Demand for Representative Firm’s Product

Rothschild index

Agriculture

-1.8

-96.2

[removed]

Construction

-1.0

-5.2

[removed]

Durable manufacturing

-1.4

-3.5

[removed]

Nondurable manufacturing

-1.3

-3.4

[removed]

Transportation

-1.0

-1.9

[removed]

Communication and utilities

-1.2

-1.8

[removed]

Wholesale trade

-1.5

-1.6

[removed]

Retail trade

-1.2

-1.8

[removed]

Finance

-0.1

-5.5

[removed]

Services

-1.2

-26.4

[removed]

(b) Based on these calculations, which industry most closely resembles perfect competition?

[removed]

Transportation.

[removed]

Wholesale trade.

[removed]

Finance.

[removed]

Retail trade.

(c) Which industry most closely resembles monopoly?

[removed]

Wholesale trade.

[removed]

Retail trade.

[removed]

Finance.

[removed]

Transportation.

Note:TheRothschild index is given by,

R = ET/EF

where ET is the elasticity of demand for the total market and EF is the elasticity of demand for the individual firm’s product.

For perfect competitionRothschild index is 0 and 1 for monopoly so its value lies in between 0 to 1.

The post Eco – calculate the rothschild index for each industry appeared first on oneacademyessays.

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