3edCA pizza restaurant raises the price of their pizza by 10%. As a result, they witness a 20%decrease in the quantity demand of their pizza. What is the price elasticity of demandfor this pizza restaurant?O-.250-2O-0.5O-10C$r%5tgOll6byh&7U8i3(9kOO

Answered: A pizza restaurant raises the price of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3
e
d
C
A pizza restaurant raises the price of their pizza by 10%. As a result, they witness a 20%
decrease in the quantity demand of their pizza. What is the price elasticity of demand
for this pizza restaurant?
O-.25
0-2
O-0.5
O-10
C
$
r
%
5
t
g
Oll
6
b
y
h
&
7
U
8
i
3
(
9
k
O
O

Expert Solution

Introduction

Price elasticity of demand: It measures the percentage change in the quantity demanded for a 1% increase in the price level. If the absolute value of the elasticity of demand is greater than 1, we say the demand is elastic. Whereas if the absolute value of the elasticity of demand is lesser than 1, we say the demand is inelastic.

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