determine by how much the demand for Florida Indian River oranges would change as a result of a 10 percent increase in the price of Florida interior oranges, and vice versa.
To determine how the demand for Florida Indian River oranges would change as a result of a 10 percent increase in the price of Florida interior oranges, you need to understand the concept of cross-price elasticity of demand.
Cross-price elasticity of demand measures the responsiveness of the quantity demanded of one good to a change in the price of another good. In this case, we are interested in the cross-price elasticity of demand between Florida Indian River oranges (the first good) and Florida interior oranges (the second good).
The formula for cross-price elasticity of demand is:
Cross-price elasticity = percentage change in quantity demanded of the first good / percentage change in price of the second good
Let's assume that the price of Florida interior oranges increases by 10 percent. To determine the resulting change in demand for Florida Indian River oranges, you need to know how much the quantity demanded of Florida Indian River oranges will change in response to this price increase.
To calculate the percentage change in quantity demanded of Florida Indian River oranges, you need information on the initial quantity demanded and the final quantity demanded after the price increase. Let's assume the initial quantity demanded of Florida Indian River oranges is Q1, and the final quantity demanded after the price increase is Q2.
The percentage change in quantity demanded can be calculated using the formula:
Percentage change in quantity demanded = ((Q2 - Q1) / Q1) * 100
Now, let's assume this percentage change in quantity demanded is D%.
Since the question assumes a 10 percent increase in the price of Florida interior oranges, the percentage change in price is 10%.
Using the formula for cross-price elasticity of demand mentioned earlier, we can calculate the cross-price elasticity of demand between Florida Indian River oranges and Florida interior oranges:
Cross-price elasticity = (D% / 10%)
If the cross-price elasticity is positive, it indicates that the two goods are substitutes, meaning that an increase in the price of one leads to an increase in the demand for the other (and vice versa). If the cross-price elasticity is negative, it indicates that the two goods are complements, meaning that an increase in the price of one leads to a decrease in the demand for the other (and vice versa).
Once you have calculated the cross-price elasticity, you can interpret the result to determine the direction and magnitude of the demand change for Florida Indian River oranges as a result of the price increase for Florida interior oranges.