CHAPTER 4 Demand Theory 143 elasticity of demand between cellophane and these other products, DuPont successfully argued that the relevant market was not cellophane but flexible packaging materials. Since DuPont had less than 20 percent ofthis market, the courts concluded in 1953 that DuPont hhad not monopolized the market. This use of cross-price elasticity of demand is examined in greater detail in Chapter 13, which deals with business regulation and antitrust. Case Study 4-5 gives the estimated cross-price elasticity of demand for various commodities, while Case Study 4-6 examines the substitution between domestic and foreign goods. CASE STUDY 4-5 ¢ ice Ela: ‘The first row of Table 4-5 shows thatthe cross-price elasticity of demand of margarine with respect to the price of butter is 1.53 percent. This means that 1 percent increase in the price of butter leads to a 1.53 percent increase in the demand for margarine ‘Thus, margarine and butter are substitutes in the United States. Rows 2 and 3 show that pork and beef in the United States and mutton/lamb and beef/veal in the United Kingdom are also substitutes, although rete tole PLT a coe URE ee not as strong as margarine and butter in the United States. On the other hand, pork and beet/veal are unrelated products in the United Kingdom (row 4), ‘hile entertainment and food inthe United States are ‘complementary (row 8). This means that a1 percent increase inthe price of beef/veal leads tno change in the demand for pork in the United Kingdom, while a 1 percent inthe price of food leads to 00.72 reduction inthe demand for entertainment in the United States. ocr ‘commodity x Commodity ¥| Elasticity Margarine (US) 7° Bauer US) Ise 94 9 Pak (U5) Beet Wis) 40" Matton/iam (UK) Beetheal (UK) oe Fant (UK) Beetveal (UK) ‘oon > 2 Nawal gas (US) lett (US) os deen] Coal (Ireland) it rand) om Coal (Ireland) Natural as (Ueland) 40" | Enertainmeat (US) Food (US) 07a = e00 | European ears US domestic & Asan cre on | Asian cars US domestic & European cas ay | US domestic cars aropees & Asan cas ow Automobile (Austais) Bs transportation (Australi) 007 DM. Helen “Compton hry Ds, amar 1 St Ii LC Oi Conga La iE T.Fuitetal."Am Almont eal Demand Sytem for Visitor Expendires” Journal of Transport eonamict and Poly My 1983). mS MeCarths.on ch The Scture of Food Demin: Iaerelitedness and Duly,” Americen Juma of