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Intermediate Microeconomics Instructor: Sandhya Patlolla Assignment 2 1. The demand for pizzas in a large town is written as: Q, = 26 10P + SR,
Intermediate Microeconomics Instructor: Sandhya Patlolla Assignment 2 1. The demand for pizzas in a large town is written as: Q, = 26 10P + SR, Pg +10Y , where Qd is the quantity demanded, P is the price of pizza, PE, is the price of burrito, PS is the price 0 soft drinks sold in the pizza restaurants, and Y is personal income per month (in thousand dollars Suppose B, = $4; PS = $1 and Y = 3 (in thousand dollars) (Don't substitute income has 3000. Us Y =3) The supply ofpizza is: Qs = 30 + 5P 15P input Where: P = price of pizza and P = price of the inputs = $2 input (i) Draw the demand curve. (ii) On the same panel above, draw the supply curve. (iii)Find the equilibrium price and quantity of pizza. (iv)Calculate the effect of the change in price of burrito on the equilibrium price and quantity using comparative statics. (V) Calculate the effect of the change in in the price of soda on the equilibrium price and equilibrium quantity using comparative statics. (vi)Calculate the effect of the change in in the income on the equilibrium price and equilibrium quantity using comparative statics. (vii) Calculate the effect of the change in the price of the input (13mm ) on the equilibrium pric- and equilibrium quantity using comparative statics. (viii) Estimate the following elasticities and interpret the values. (a) Price elasticity of demand for pizza at the equilibrium. (b) Cross-price elasticity of demand between pizza and burrito at the equilibrium. (c) Cross-price elasticity of demand between pizza and soda at the equilibrium. ((1) Income elasticity of demand for pizza at the equilibrium. (e) Price elasticity of supply of pizza at the equilibrium
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