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.

BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter 5, Problem 7PA
Textbook Problem

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.

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