Posted: December 18th, 2022
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.
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.
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