A local firm produces three types of pizza for delivery to homes in the area. The owners have conducted research to discover the elasticity for each of the three pizzas. The schedules are shown below (quantities are per week). Price (RM) of Pizza A | Pizza A (Qd) | Pizza B (Qd) | Pizza C (Qs) ---------------------|--------------|--------------|-------------- 12 | 1000 | 200 | 300 11 | 1040 | 200 | 400 10 | 1080 | 600 | 500 9 | 1120 | 1000 | 600 8 | 1160 | 1400 | 700 7 | 1200 | 1800 | 800 6 | 1240 | 2200 | 900 5 | 1280 | 2600 | 1000 a) Calculate the cross elasticity of demand for Pizza B when the price of Pizza A increases from RM7 to RM11.00. b) Calculate the price elasticity of demand for Pizza A if the price of Pizza A increases from RM5.00 to RM9.00. c) Based on (b), state whether the firm should increase or decrease the price if it wishes to increase its sales revenue and give one (1) reason. d) Calculate the price elasticity of supply for Pizza C if the price of Pizza C decreases from RM10 to RM5.00. e) State two (2) determinants of price elasticity of supply.
Added by Joseph B.
Step 1
00 using the midpoint formula: Quantity of Pizza B before price change = 200 Quantity of Pizza B after price change = 200 Quantity midpoint = (200 + 200) / 2 = 200 Price of Pizza A before change = RM7 Price of Pizza A after change = RM11 Cross elasticity of Show more…
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