In one month, a Pizza Hut restaurant sold 5500 personal pizza at RO 4.50 per pizza. When this restaurant increased its price by 30%, its total revenue for the next month increased to RO 18,720. As a result of this price increase, however, the monthly sales of POP decreased from 3500 to 3000 cans. Using the arc elasticity method: (i) Find the own price elasticity of demand for this restaurant’s pizza. (ii) Find the cross elasticity of demand for pop with respect to the price of the pizzas. Are the two substitutes or compliments?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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In one month, a Pizza Hut restaurant sold 5500 personal pizza at RO 4.50 per pizza. When this restaurant increased its price by 30%, its total revenue for the next month increased to RO 18,720. As a result of this price increase, however, the monthly sales of POP decreased from 3500 to 3000 cans. Using the arc elasticity method:

(i) Find the own price elasticity of demand for this restaurant’s pizza.

(ii) Find the cross elasticity of demand for pop with respect to the price of the pizzas. Are the two substitutes or compliments?

 

 

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how to obtain given, Q2=3200?

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