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If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :
- a).67
- b)1.5
- c)2.0
- d)3.0
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
If the local pizzeria raises the price of a medium pizza from Rs. 60 t...
Given data:
- Initial price (P1) = Rs. 60
- Final price (P2) = Rs. 100
- Initial quantity demanded (Q1) = 700 pizzas
- Final quantity demanded (Q2) = 100 pizzas
To find: Price elasticity of demand (PED)
Formula for PED:
PED = (percentage change in quantity demanded) / (percentage change in price)
Calculation:
- Change in price = P2 - P1 = Rs. 100 - Rs. 60 = Rs. 40
- Average price = (P1 + P2) / 2 = (Rs. 60 + Rs. 100) / 2 = Rs. 80
- Change in quantity demanded = Q2 - Q1 = 100 - 700 = -600
- Average quantity demanded = (Q1 + Q2) / 2 = (700 + 100) / 2 = 400
- Percentage change in price = (change in price / average price) x 100%
= (Rs. 40 / Rs. 80) x 100% = 50%
- Percentage change in quantity demanded = (change in quantity demanded / average quantity demanded) x 100%
= (-600 / 400) x 100% = -150%
Substituting these values in the PED formula:
PED = (-150% / 50%) = -3.0
Since the value of PED is negative, we take the absolute value to get a positive answer:
PED = 3.0
Therefore, the price elasticity of demand for pizzas is 3.0, which means that a 1% increase in price leads to a 3% decrease in quantity demanded. The demand for pizzas is elastic, which implies that consumers are quite sensitive to changes in price.
- Initial price (P1) = Rs. 60
- Final price (P2) = Rs. 100
- Initial quantity demanded (Q1) = 700 pizzas
- Final quantity demanded (Q2) = 100 pizzas
To find: Price elasticity of demand (PED)
Formula for PED:
PED = (percentage change in quantity demanded) / (percentage change in price)
Calculation:
- Change in price = P2 - P1 = Rs. 100 - Rs. 60 = Rs. 40
- Average price = (P1 + P2) / 2 = (Rs. 60 + Rs. 100) / 2 = Rs. 80
- Change in quantity demanded = Q2 - Q1 = 100 - 700 = -600
- Average quantity demanded = (Q1 + Q2) / 2 = (700 + 100) / 2 = 400
- Percentage change in price = (change in price / average price) x 100%
= (Rs. 40 / Rs. 80) x 100% = 50%
- Percentage change in quantity demanded = (change in quantity demanded / average quantity demanded) x 100%
= (-600 / 400) x 100% = -150%
Substituting these values in the PED formula:
PED = (-150% / 50%) = -3.0
Since the value of PED is negative, we take the absolute value to get a positive answer:
PED = 3.0
Therefore, the price elasticity of demand for pizzas is 3.0, which means that a 1% increase in price leads to a 3% decrease in quantity demanded. The demand for pizzas is elastic, which implies that consumers are quite sensitive to changes in price.
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Community Answer
If the local pizzeria raises the price of a medium pizza from Rs. 60 t...
700-100/700+100*100+60\100-60=600\800*160\40=3 use arc-elasticity formula
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If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer?
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If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer?.
If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the local pizzeria raises the price of a medium pizza from Rs. 60 to Rs. 100 and quantity demanded falls from 700 pizzas a night to 100 pizzas a night, the price elasticity of demand for pizzas is :a).67b)1.5c)2.0d)3.0Correct answer is option 'D'. Can you explain this answer?.
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