Question

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. 0.67
• B. 1.5
• C. 2
• D. 1.29

Answer 1

The correct option is D 1.29

Here,

$Q=700,Q_1=100,P=Rs.60$ and $P_1=Rs.100$

$\Delta Q=Q_1-Q=-(100-700)=600$

$\Delta P=P_1-P=Rs.(100-60)=40$

We know, $E_d=\frac{\Delta Q/Q}{\Delta P/P}$

$\Rightarrow$ $E_d=\frac{600/700}{40/60}$

$\Rightarrow$ $E_d=\frac{9}{7}=1.285\approx 1.29$

$\therefore$ The required price elasticity of demand for pizza is $1.29$