Institute of Management, Nirma University

Master of Business Administration, Batch 2021-23

Economic Analysis for Business Decisions

Individual Assignment

Submitted to: Prof. M. Mallikarjun

Submitted by: Hardik Parikh

Roll No: 211259
Section: D

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 Commodity: Wheat
Country: China

Statistical Data

GDP Per Price of Price of

Domestic Consumption
Year Capita Wheat Corn
(Tonnes)
(Yuan) (Yuan/tonne) (Yuan/tonne)
1971 33538 157.08 230 170
1972 37270 183.48 270 160
1973 41365 218.23 250 230
1974 41606 228.8 250 230
1975 43510 259.88 260 170
1976 48543 244.2 265 210
1977 51675 290.45 280 220
1978 52887 251.16 310 190
1979 66595 305.44 340 240
1980 75999 323.7 340 240
1981 78840 342.78 350 240
1982 79470 385.7 370 260
1983 82990 445.5 370 250
1984 89105 584.83 440 300
1985 95155 867.3 430 310
1986 97265 975.72 460 360
1987 99040 939.96 480 360
1988 101826 1059.32 530 420
1989 102367 1172.47 630 500
1990 102598 1523.22 610 440
1991 105429 1778.22 600 470
1992 104281 2020.32 660 540
1993 105343 2179.06 730 600
1994 105355 4086.72 1130 960
1995 106499 5105.7 1510 1340
1996 107615 5913.06 1620 1140
1997 109056 6506.24 1410 1130
1998 108250 6880.7 1320 1230
1999 109340 7228.44 1250 1070
2000 110278 7940.52 1020 880
2001 108742 8718.84 1090 1080
2002 105200 9513.72 1060 1030
2003 104500 10672.92 1140 1140
2004 102000 12494.52 1520 1400

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 2005 101500 14374.6 1510 1300
2006 102000 16729.03 1470 1360
2007 106000 20501.34 1600 1570
2008 105500 24102.6 1770 1720
2009 108000 26172.56 1920 1740
2010 111500 30803.5 1760 2060
2011 123500 36292.28 1930 2280
2012 126000 39860.27 2170 2400
2013 117500 43363.65 2440 2400
2014 117500 47302.64 2360 2420
2015 117500 50660.76 2360 2360
2016 119000 54184.2 2360 1950
2017 121000 60022.04 2360 1820
2018 125000 66147.51 2320 1960
2019 126000 70599.47 2240 1980
2020 150000 72450 2240 2010

Summary Output
Regression Statistics
Multiple R 0.795378237
R Square 0.63262654
Adjusted R
Square 0.608667402
Standard Error 16821.84521
Observations 50
Anova
Significance
df SS MS F F
Regression 3 22415308790 7.47E+09 26.40439411 4.40064E-10
Residual 46 13016825913 2.83E+08
Total 49 35432134704

Standard Lower Upper

Coefficients Error t Stat P-value Lower 95% Upper 95% 95.0% 95.0%
Intercept 60183.93124 5464.86409 11.01289 1.73243E-14 49183.73037 71184.13212 49183.73037 71184.13212
GDP Per - - -
Capita 0.280090262 0.239338745 -1.17027 0.24792092 0.761854168 0.201673643 0.761854168 0.201673643
Price of Wheat
(Yuan/tonne) 43.35351301 17.15127855 2.527713 0.0149796 8.829779889 77.87724612 8.829779889 77.87724612

Price of Corn -
(Yuan/tonne) 8.719760603 15.6187313 -0.55829 0.579354722 -40.1586361 22.71911489 -40.1586361 22.71911489

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Regression Analysis
Symbol
Description Coefficients
Used
Intercept 60183.93
X Variable 1 Wheat Price (yuan/tonne) Wp 43.350
X Variable 2 GDP Per Capita (yuan) Pc -0.28
X Variable 3 Corn Price (yuan/tonne) Cp -8.720

Demand Function
Q = Consumed good (demand)

Q = f(Wp, Pc, Cp)

Q = 60183.93 + 43.35*Wp - 0.28*Pc - 8.72*Cp

Demand for Last Observation

Last Observation Data
Q = 60183.93 + 43.35*Wp - 0.28*Pc -8.72*Cp Consumption = 150000
Q = 60183.93 + 43.35*2240 - 0.28*72450 -
8.72*2010 Wp = 2240
Q = 119474.73 Pc = 72450
Cp = 2010
Wp = 0.023Q - 516.04

Price Elasticity Income Elasticity

ep = (dQ / dP) * (P/Q) eI = (dQ / dI) * (I/Q)
ep = (dQ / dWp) * (Wp/Q) eI = (dQ / dPc) * (Pc/Q)

ep = (43.35) * eI = (-0.28) * (72450/119474.73)

(2240/119474.73)
ep = 0.81287 eI = -0.1698

Revenue Function
Cross Price Elasticity (Corn)
Total Revenue (TR) = Wp * Q
exy = (dQ / dCp) * (Cp/Q)
TR = 0.023Q2 - 516.04Q
exy = (-8.72) * Average Revenue (AR) = TR / Q
(2010/119474.73) AR = 0.023Q - 516.04
Marginal Revenue (MR) =
exy = -0.1467 d(TR)/dQ
MR = 0.046Q - 516.04

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Conclusion
 In this case the price elasticity is less than 1 which indicates that it is slightly inelastic.
Here the cross elasticity and income elasticity both are negative. So from the results we
can conclude that wheat is an inferior good in china.

References

 “National and Provincial Data.” USDA ERS - Data Products,

data.ers.usda.gov/reports.aspx?ID=17884.
 “China Wholesale Price: Corn.” CEIC, www.ceicdata.com/en/china/livestock-
breeding-condition/cn-wholesale-price-corn.
 “China GDP per Capita 1960-2021.” MacroTrends,
www.macrotrends.net/countries/CHN/china/gdp-per-capita.

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