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**Unformatted text preview: **revenue per unit , this impact will be more than oﬀset by increase in quantity sold and TR will increase if price falls. Problem 3 Q 1 = 30 (a) P 2 = 5, P 2 = 4 Q 1 = 39. Δ P 2 =-1, Δ Q 1 = 9. Using the initial price and quantity: E 12 = 9-1 · 5 30 =-1 . 5. Complements. Using average price and quantity is okay as long as the formula is provided. (b) M = 25 , 000 M = 22 , 500, Q 1 = 36. E M = 6-2 , 500 · 25 , 000 30 . Obviously this is an inferior good: lower income induces people to buy more pizza; income elasticity of demand is negative. As a practice try showing both situations on diagrams. 1...

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