# Eco – calculate the rothschild index for each industry

Refer to the figure below:

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

 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?

(c) Which industry most closely resembles monopoly?

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.

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