The price elasticity of demand for Papua New Guinea exports of cocoa and coffee
The price elasticity of demand for Papua New Guinea exports of cocoa and coffee is calculated using the perfect substitutes model of world trade. Econometric estimates are made of the world price elasticity of demand for cocoa and coffee. These estimates are combined with data on Papua New Guinea's world market share, supply responses in competing countries, and price transmission elasticities in consuming and producing countries to calculate own-price elasticities of demand of at least -11 for cocoa and -12 for coffee exports. These estimates show that Papua New Guinea can safely increase production of cocoa and coffee without fear of causing prices, and export revenues, to fall significantly. If protection for import-substituting industries increases domestic costs, cocoa and coffee producers will be made worse off because they are unable to pass these extra costs forward to foreign consumers.
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| Format: | biblioteca |
| Published: |
Nov
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| Subjects: | CAFE, CACAO, EXPORTACIONES, DEMANDA, ELASTICIDAD DE LOS PRECIOS, PAPUA NUEVA GUINEA, |
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| Summary: | The price elasticity of demand for Papua New Guinea exports of cocoa and coffee is calculated using the perfect substitutes model of world trade. Econometric estimates are made of the world price elasticity of demand for cocoa and coffee. These estimates are combined with data on Papua New Guinea's world market share, supply responses in competing countries, and price transmission elasticities in consuming and producing countries to calculate own-price elasticities of demand of at least -11 for cocoa and -12 for coffee exports. These estimates show that Papua New Guinea can safely increase production of cocoa and coffee without fear of causing prices, and export revenues, to fall significantly. If protection for import-substituting industries increases domestic costs, cocoa and coffee producers will be made worse off because they are unable to pass these extra costs forward to foreign consumers. |
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