Question
1. Demand for pizza depends on the price of pizza and the price of salad and is given as = 100s 4p 2 . Restrict
1. Demand for pizza depends on the price of pizza and the price of salad and is given as = 100s 4p2. Restrict attention to prices where x 0
(a) (2 points) Find a formula for the price elasticity of demand for pizza as a function of p and s only (that means not a function of x). (b) (2 point) What happens to the demand for pizza (with respect to own price p) as the price of salad s increases? Does it become more elastic, less elastic, stay the same, or depend on the prices p and s ? Explain. (c) (2 points) What is the cross-price elasticity of demand? Use your result to determine if the goods are substitutes or complements.
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