# Suppose that your demand schedule for pizza is as follows: Price Quantity Demanded (income = $20,000) Quantity Demanded (income =$24,000) $8 40 pizza 50 pizza 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. BuyFindarrow_forward ### Principles of Macroeconomics (Mind... 8th Edition N. Gregory Mankiw Publisher: Cengage Learning ISBN: 9781305971509 #### Solutions Chapter Section BuyFindarrow_forward ### Principles of Macroeconomics (Mind... 8th Edition N. Gregory Mankiw Publisher: Cengage Learning ISBN: 9781305971509 Chapter 5, Problem 7PA Textbook Problem 18774 views ## Suppose that your demand schedule for pizza is as follows: Price Quantity Demanded (income =$20,000) Quantity Demanded (income = $24,000)$8 40 pizza 50 pizza 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.

Subpart (a):

To determine
Price elasticity of demand.

### Explanation of Solution

1. (i) If the income is $20,000, then the price of pizza rises from$8 to $10, and the quantity demanded decreases from 40 to 32. By midpoint method, the price elasticity of demand is calculated as follows: Price elasticity of demandIncome$20,000=QuantityPresentQuantityPreviousQuantityPresent+QuantityPrevious2PricePresentPricePreviousPricePresent+PricePrevious2=3240(32+402)108(10+82)=8(36)2(9)=0.22220.2222=1

The price elasticity of demand for pizza is -1

Subpart (b):

To determine
Income elasticity of demand.

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