Question attached You run a small pizza shop named Pizza Hat. Initially you sold pizzas for $15 and every weekyou sold around 600 pizzas. Each pizza costs you $6 to make. One day you decided to offerdiscounts to customers to see if you can boost sales significantly. So you slashed the priceto $13.5, and it turned out that you can sell 90 more pizzas. Hence you conclude that theelasticity of demand for your pizzas at $15 isis constant (does not vary with price). In order to maximize the profits, you should set theprice at $Suppose the elasticity of demand

Given; Price of pizza= $15 Quantity sold= 600 Cost of making 1 pizza= $6 After offering discount:-…

Answered: You run a small pizza shop named Pizza…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.9P

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Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
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