Demand for pizza in a neighborhood is as follows:
Q = 150 \text{ }-\text{ } 5P \text{ }-\text{ } 5P_b + 0.01Y
Where P = price per medium sized pizza, Q = quantity demanded for pizza,
P_b = price of beer per six pack = $4,
Y = consumer income = $10,000
a. Calculate the price elasticity of demand for pizza if P = $8.
b. Calculate the cross price elasticity for pizza if P = $8. Are Pizza and Beer substitutes or
complements?
c. Calculate the income elasticity for pizza if P = $8. Is pizza a normal good or an inferior
good?