Sweet Potatoes Case

Syndicate IV :
Intan Prisanti (29118072)
Andre Sebastian Yonathan (29118154)
Yosia Christi Vesara (29118132)
Rizki Dicky Amanda (29118253)
Sweet Potatoes

QD = 7609 – 1606 Ps + 59 N + 947i + 478 Pw – 271t

Qd : quantity of sweet potatoes sold per year in the US per 1.000 hundred weight (cwt)
Ps = real-dollar price of sweet potatoes per hundred weight received by farmers
N = two-year moving average of total U.S population, in millions
I = real per capita personal disposable income, thousand of dollars
Pw = real-dollar price of white potatoes per hundredweight received by farmers
T = time trend (t = 1 for 1949. t = 2 for 1950, up yp t=24 fpr 1972)
 QD = 7609 – 1606 Ps + 59 N + 947i + 478 Pn – 271t

WHY?
declines by 1,606 for each $1 increase in its price (Ps)
increases by 59 for each 1 million increase in population (N) —> demand curve shifts to right
increases by 947 for each $1,000 increase in real income (I) —> demand curve shifts to right
increases by 479 for each $1 increase in the real price of white potatoes (Pw) —> demand curve
shifts to right —> (substitute)
falls by 271 with each passing year (t) —> demand curve shifts to left —> (declining tastes)
1949,
QD = 7609 – 1606 Ps + 59 N + 947i + 478 Pw – 271t
As mention in the case we could make new equation for 1949 based
from the data;
N = 150,73 I = 1,76 Pw = 2,94 t=1
QD = 7609 – 1606 Ps + 59(150,73) + 947(1,76) + 478(2,94) – 271(1)
QD = 19306 - 1606 Ps
P1(7) QD = 19306 – 1606(7) = 8064
P2(5,6) QD = 19306 – 1606(5,6) = 10.312
P3(4) QD = 19306 – 1606(4) = 12.882
1972,
QD = 7609 – 1606 Ps + 59 N + 947i + 478 Pw – 271t
As mention in the case we could make new equation for 1949 based
from the data;
N = 208,78 I = 3,19 Pw = 2,41 t = 24
QD’ = 7609 – 1606 Ps + 59(208,78) + 947(3,19) + 478(2,41) – 271(24)
QD’ = 17598 - 1606 Ps
P1(7) QD = 17598 – 1606(7) = 6356
P2(5,6) QD = 17598 – 1606(5,6) = 8604,4
P3(4) QD = 17598 – 1606(4) = 11.174
 Market Demand Curve of Sweet Potatoes in U.S

The graph show us that the demand curve of sweet potatoes in1949 and 1972. This difference caused by:
Reduction in tastes for sweet potatoes between 1949 and 1972, makes the curve tends to shift to the left (-6.504 in number)
Reduction in the price of substitute (white potatoes) makes the curve tends to shift to the left (-25.387 in number)
Increase in population tends to shift demand curve to the right (+3.424,95 in number)
Increase in personal disposable income also tends to shift demand curve to the right (+1.354,21 in number)

The first two reasons contribute higher number (-31.891) than the remaining two (+4.779,16). In the equation, this reduction is
shown at the constants, 19.306 in 1949 demand function and 17.598 in 1972 demand function. That is why, overall demand
curve in 1972 is shifted to the left, compared with demand curve in 1949.
Price Elasticity of Demand
△#$
!# '( ) (K A( )K I)
Ep = △%$! = ')
= (
Ep = .
% )K A) (K I(
1949 1949
P1 = 7 QD = 8064
P2 = 5,6 QD = 10.312 <=.?<@AB=CD H,C IG
P3 = 4 QD = 12.882 ‘ Ep = E,FAG
. <=.?<@ I B=CD = -1,1
++,-⁄
-./,
E =
p 01,,! = −1,3 <@BB@A<=?<@ D IH,C
+73.⁄
3 Ep = JAH,C
. <@BB@ I<=?<@
= 0,67
1.81+
E =
p 01,/ = −0,87
!7,/
We can conclude that in 1947 sweet potatoes has Ep
< 1 so it iss inelastic, we can assume that it has few
substitute
Price Elasticity of Demand
△#$
!# '( ) (I @( )I F)
Ep = △%$! = = Ep = .
% ') ( )I @) (I F(

1972 1972
P1 = 7 QD = 6356 <=>?,?@=AB= B,= FE
Ep = C,D@E
. <=>?,? F=AB=
= -1,35
P2 = 5,6 QD = 8604,4
P3 = 4 QD = 11.174
GGGE?@<=>?,? ? FB,=
**+,,+! Ep = H@B,=
. GGGE? F<=>?,? = -0,77
Ep = ./0.
12,+! = −0,56
3
*0.8,.
!,.9+,+
Ep = 12,. = −1,04
!0,. We can conclude that in 1947 sweet potatoes has Ep
< 1 so it iss inelastic, we can assume that it has few
substitute
Eco- Events

1949
There were several events that
happened in 1949, one of the
biggest event in history that U.S
just finished from World War II
and started to grow, on that year
price of food was so unpredictable
food’s prices in the beginning of
1949 decrease but increase in the
end of the year. This year, US
inflation -0,95%.
1972
One of biggest event in this year
was Vietnam war, that effect
economic event in 1972 inflation
number was 3,2%. Price of
substitute good was decrease
compared with 1949.