00:01
So first of all, we're asked about the income elasticity of demand.
00:04
So we know that the income elasticity of demand is equal to the percent change in the quantity of demand for pizzas, right? we're being asked about the income elasticity of pizza.
00:19
So we're thinking about the percentage change in the quantity of pizza with respect to the income.
00:25
So there's some information here about sue's subs, but that's bait information.
00:30
Need it because that doesn't figure into the income elasticity.
00:34
If we were say interested in maybe like the cross price elasticity would need that income, that information, but the sous subs information here is total bait, right? so we know that the income is equal to 100 ,000 and then it is, oh sorry, 10 ,000.
00:53
That did seem kind of rich.
00:55
But then it's going to 12 ,000, right? so the midpoint is 11 ,000 we know that the quantity demanded right quantity demanded is 50 and then after the income change the quantity demanded of is going from 50 to 60 so the midpoint of the quantity demanded for pizza is 55 so i can now plug this in right the the change in pizza was 50 minus 60 relative to the midpoint to make it a midpoint percentage change the change in income was 12 ,000 minus 10 ,000 relative to the midpoint of 11 ,000 so this is equal to 10 over 55 over the thousands all cancel two over 11 right or if you prefer you've got 10 times 11 over 2 times 55, which is equal to one, right? very convenient that someone has figured that out...