Business, 21.09.2019 04:30 ghollins

Suppose that your demand schedule for pizza is as follows: price quantity of pizzas demanded quantity of pizzas demanded (dollars) (income = $20,000) (income = $24,000) 8 40 50 10 32 45 12 24 30 14 16 20 16 8 12 using the midpoint method, your price elasticity of demand as the price of pizzas increases from $14 to $16 is if your income is $20,000 and if your income is $24,000. if the price of a pizza is $12, your income elasticity of demand is as your income increases from $20,000 to $24,000. however, if the price of a pizza is $16, your income elasticity is .

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Answer from: 22savage2017

1. a) Price elasticity at income $20000 = -1

b) Price elasticity at income $24000 = -0.47

2. a) Income elasticity at price $12 = 1.25

b) income elasticity at price $16 = 2.5

Explanation:

Price Elasticity of demand = change is quantity / change in price

Where

Change in quantity = (quantity current – quantity previous)/ ((quantity current+ quantity previous)/2)

Change in Price = (Price current – Price previous)/ (Price current+ Price previous)/2)

Putting in values for income $20,000

Price elasticity income $20000 = {(32-40)/((32+40)/2)} / {(10-8)/((10+8)/2)}

= -1

Similary

Price elasticity income $24000 = {(32-40)/((32+40)/2)} / {(10-8)/((10+8)/2)}

= -0.47

2) For income elasticity of demand, change in quantity demand is divided by change in income. Putting in the values

Income elasticity of deman @ $12 = {(30-24)/24}/{(24000-20000)/20000} = 1.25

Income elasticity of deman @ $16 = {(12-8)/8}/{(24000-20000)/20000} = 2.5

Answer from: Jasten

The elasticity of demand is the change in quantity due to economic factors such as price, salary, etc.

The price elasticity of demand, when price increases from $14 to $16 and

Income is $20,000 is -5Income is $24,000 is -3.75

The income elasticity of demand when income increases from $20000 to $24000 and

Price is $12 is 1.22Price is $16 is 2.2

(a): Price elasticity of demand

Price elasticity of demand is calculated as follows:

$E_p = \frac{\Delta Q}{\Delta P}$

Where:

$\Delta P = (P_2 - P_1) \div (P_2 + P_1)/2$ --- change in price

$\Delta Q = (Q_2 - Q_1) \div (Q_2 + Q_1)/2$ --- change in quantity

When price increases from $14 to $16 and income is $20,000;

We have:

$Q_1 = 16\\Q_2 = 8$

So, we have:

$\Delta P = (P_2 - P_1) \div (P_2 + P_1)/2$

$\Delta P = (16 - 14) \div (16 + 14)/2$

$\Delta P = 2 \div 15$

$\Delta P = \frac 2{15}$

$\Delta Q = (Q_2 - Q_1) \div (Q_2 + Q_1)/2$

$\Delta Q = (8 - 16) \div (8+16 )/2$

$\Delta Q = -8 \div 12$

$\Delta Q = -\frac 23$

So, we have:

$E_p = \frac{\Delta Q}{\Delta P}$

$E_p = -\frac{2}{3} \div \frac{2}{15}$

$E_p = -\frac{2}{3} \times \frac{15}{2}$

E_p = -5

When price increases from $14 to $16 and income is $24,000

We have:

$Q_1 = 20\\Q_2 = 12$

So, we have

$\Delta Q = (Q_2 - Q_1) \div (Q_2 + Q_1)/2$

$\Delta Q = (12 - 20) \div (12+20 )/2$

$\Delta Q = -8 \div 16$

$\Delta Q = -\frac 12$

So, we have:

$E_p = \frac{\Delta Q}{\Delta P}$

$E_p = -\frac{1}{2} \div \frac{2}{15}$

$E_p = -\frac{1}{2} \times \frac{15}{2}$

$\Delta Q = -\frac{15}{4}$

$\Delta Q = -3.7 5$

Hence, the price elasticity of demand, when price increases from $14 to $16 and

Income is $20,000 is -5Income is $24,000 is -3.75

Solving (b): Income elasticity of demand

Income elasticity of demand is calculated as follows:

$E_I = \frac{\Delta Q}{\Delta I}$

Where:

$\Delta I = (I_2 - I_1) \div (I_2 + I_1)/2$ --- change in income

$\Delta Q = (Q_2 - Q_1) \div (Q_2 + Q_1)/2$ --- change in quantity

When income increases from $20000 to $24000 and price is $12

We have:

$Q_1 = 24\\Q_2 = 30$

So, we have:

$\Delta I = (24000 - 20000) \div (24000 + 20000)/2$

$\Delta I = 4000\div 22000$

$\Delta I = \frac 2{11}$

$\Delta Q = (Q_2 - Q_1) \div (Q_2 + Q_1)/2$

$\Delta Q = (30 - 24) \div (30+24 )/2$

$\Delta Q = 6 \div 27$

$\Delta Q = \frac 29$

So, we have:

$E_I = \frac{\Delta Q}{\Delta I}$

$E_I = \frac 29 \div \frac 2{11}$

$E_I = \frac 29 \times \frac {11}2$

$E_I = \frac {11}9$

E_I = 1.22

When income increases from $20000 to $24000 and price is $16

We have:

$Q_1 = 8\\Q_2 = 12$

$\Delta Q = (Q_2 - Q_1) \div (Q_2 + Q_1)/2$

$\Delta Q = (12 - 8) \div (12 + 8)/2$

$\Delta Q = 4 \div 10$

$\Delta Q = \frac 25$

So, we have:

$E_I = \frac{\Delta Q}{\Delta I}$

$E_I = \frac 25 \div \frac 2{11}$

$E_I = \frac 25 \times \frac {11}2$

$E_I = \frac {11}5$

E_I = 2.2

Hence, the income elasticity of demand when income increases from $20000 to $24000 and

Price is $12 is 1.22Price is $16 is 2.2

Read more about elasticity of demand at:

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