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?
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?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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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