Answered: A4 You are the manager for Papa John’s…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....

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A4 You are the manager for Papa John’s and know the following elasticities: η= 1.5 η I = 1.2 η xy1 = 0.5 η xy2 = -0.5 η is the price elasticity of demand for Papa John’s (PJ) cheese pizza, ηxy1 is the cross elasticity of demand between PJ cheese pizza and Pizza Hut’s (PH) cheese pizza, ηxy2 is the cross elasticity of demand between PJ cheese pizza and PJ breadsticks, and η I is the income elasticity of PJ cheese pizza. e) If average income increases by 5% by what percentage and in what direction will the demand for Papa John’s cheese pizza change? Are PJ cheese pizzas a normal good or an inferior good and how do you know?

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