Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
1) Suppose that your demand schedule for pizza is as follows: Price Qty Demanded (income = $20,000) Qty Demanded (income = $24,000) $8 40 pizzas 50 pizzas 10 32 45 12 24 30 14 16 20 16 8 12 a
1) Suppose that your demand schedule for pizza is as follows:
Price Qty Demanded (income = $20,000) Qty Demanded (income = $24,000)
$8 40 pizzas 50 pizzas
10 32 45
12 24 30
14 16 20
16 8 12
a. Use the midpoint method to calculate your price elasticity of demand as the price of pizza increases from $8 to $10 if (i) your income is $20,000 and (ii) your income is $24,000.
b. Calculate your income elasticity of demand as your income increases from $20,000 to $24,000 if (i) the price is $12 and (ii) the price is $16.
Expert Solution
a) Computation of Price Elasticity of Demand using Midpoint Method:
Price Elasticity of Demand = ((Q2 - Q1)/((Q2+Q1)/2))/((P2 - P1)/((P2+P1)/2))
(i) your income is $20,000:
Price Elasticity of Demand = ((32- 40)/((32+40)/2))/(10- 8)/((10+8)/2))
= (-8/36) / (2/9)
= -0.2222/0.2222
= 1
(ii) your income is $24,000:
Price Elasticity of Demand = ((45- 50)/((45+50)/2))/(10- 8)/((10+8)/2))
= (-5/47.5) / (2/9)
= -0.10526/0.2222
= -0.47
b) Computation of Income Elasticity of Demand using Midpoint Method:
Income Elasticity of Demand = ((Q2 - Q1)/((Q2+Q1)/2))/((I2 - I1)/((I2+I1)/2))
(i) The price is $12:
Income Elasticity of Demand = ((30- 24)/((30+24)/2))/(24000-20000)/((24000+20000)/2))
= (6/27) / (4000/22000)
= 0.2222/0.1818
= 1.22
(ii) The price is $16:
Income Elasticity of Demand = ((12- 8)/((12+8)/2))/(24000-20000)/((24000+20000)/2))
= (4/10) / (4000/22000)
= 0.4/0.1818
= 2.2
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
