Elasticity Calculation Assignment

Assignment

In this submission, you must find the Price elasticity in the market for Strawberries using the Federal Reserve Economic Database (FRED) from the St. Louis Federal Reserve.

Procedure for Submission:

1. For this assignment, you will calculate the price elasticity of the market for Strawberries. Follow the steps below to find and download the data.
   1. Data Instructions part 1:
      1.  Go to the FRED website here:  https://fred.stlouisfed.org/ 
      2.  For accuracy, copy (CTRL+C for Windows, Command+C for Macs) and paste (CTRL+V for Windows, Command+V for Macs) the following in the search bar. Note: Make sure the letters in parentheses match your found data, otherwise you will not have the correct information.
         1.  Average Price: Strawberries, Dry Pint (Cost per 12 Ounces/340.2 Grams) in U.S. City Average (APU0000711415)
         2. Click on the link to view the graph.
   2. Data structions part 2:
      1.  Click on the orange “Edit Graph” button.
      2.  Click on the “Add Line” button
      3.  Copy (CTRL+C for Windows, Command+C for Macs) and paste (CTRL+V for Windows, Command+V for Macs) the following into the search bar:
         1. Expenditures: Fresh Fruits: All Consumer Units (CXUFRSHFRUTLB0101M)
      4.  Click on the first link
      5.  Click “Add Data Series.”
      6.  Click on “Format” and scroll down to the bottom of this window.
      7.  At the bottom, you will see a toggle switch that states “Y-Axis position” choose: “Right”
   3. Data Instructions Part 3:
      1.  Select the “Edit Lines” option and select “Edit Line 1”
      2.  Select the “Modify Frequency” dropdown and select “Annual”.
      3.  For “Aggregation Method” select “Average”.
      4. You can now exit from the “Edit Graph” screen.
   4. Data Instructions Part 4:
      1.  On the left side of the “Edit Graph” button, you will see two spaces where you can enter a “start date” and “end date” for the data. Then, you will see a series of points stating “1Y, 5Y, 10Y, MAX”.
      2.  You must select at least the 10Y option. Note, if you choose to do more you should enter a specific date range in the select dates boxes.
      3.  You will now see the correct graph on your screen. Look for the blue “Download” box. Download the data to either an Excel or CSV option.
   5.  Data Instructions Part 5:
      1.  Label the data correctly in each column – the headers for the data will have the series IDs listed above. Instead label “Price” and “Retail Sales”.
      2.  Copy (CTRL+C for Windows, Command+C for Macs) all of the data (including the headers) and Paste (CTRL+V for Windows, Command+V for Macs) into a new worksheet.
      3.  In a new column, to the right of the Retail Sales, label a header “Quantity”.
      4.  In the column labelled “Quantity” divide the “Expenditures” in each cell by the corresponding “Average Price”. This will give a rough estimate of the quantity sold of pints of Strawberries. Now, copy (CTRL+C for Windows, Command+C for Macs) the “Quantity” data and Paste as values (Right click and search under “Paste Options” for the clipboard with the numbers “1,2,3” in the bottom right corner – if using the “web version simply press CTRL+SHIFT+V for Windows, Command+SHIFT+V for Macs).
      5.  Next, delete the “Expenditures” Column. Highlight the entire column, right click, and select “delete column”.
      6.  Next, highlight the headings for the Price and Quantity rows. On the right of the “Home” tab at the top of the sheet, select the “Sort and Filter” button, then “Filter”.
      7.  Find the drop down in the Price column and select “sort from largest to smallest”.
2. Required for Submission:
   1. Finding the elasticity of the entire data set
      1.  Using the lowest price (and corresponding quantity) as “P1” (and “Q1”) and highest price (and corresponding quantity) as “P2” (and “Q2”) find the elasticity using the Midpoint approach.
   2. Submit a 1 – 2 page paper that answers the questions that follow:
   3. Paper instructions:
      1. The paper must be 1 – 2 pages in length, double spaced, 12 point, Times New Roman Font.
      2. You must include a reference page.
   4. Answer the following questions:
      1. Does this data seem to show the demand or supply of Strawberries? How do you know?
      2. Before doing the exercise, did you expect the elasticity to be elastic, inelastic, or unit elastic? Explain why you believe this to be the case?
      3. What is the value of the elasticity you found above? *Be sure to include your calculations to receive full credit*.
      4. Is the elasticity you found above elastic, inelastic, or unit elastic? Explain your response. Was your assumption from question 2 correct?
      5. What are some possible explanations as to why the elasticity is what you calculated?
      6. Based on the elasticity you found above, explain how a 10% increase in the price of Strawberries would impact the quantity.